What is factoring Invoice and how can you generate it?
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Last modified 6/24/2021 7:51:36 AM EST |
Added by TruckLogics Team
Invoice factoring is the act of assigning a third-party business to convert all your outstanding invoices into cash. The company that buys your invoice debt is called a factoring company. The factoring company pays you an amount equivalent to what the invoices are worth, minus a fee (in percentage or dollar). The benefit of factoring is that you get paid sooner.
To factor an invoice, it must have a term of 30 to 90 days. Then, under Factoring Details of the invoice page, select a Factoring Company, enter the Factoring Rate, and select ‘%’ or ‘$’ on how you like to pay the fee to the factoring company to generate a factoring invoice. You can set a company as your default factoring company and generate all the factoring invoices under that company.
Here's how you factor an invoice:
- Go to Accounts >> Invoices >> + Add Invoice or the Invoice tab under a dispatch.
- Under Factoring Details, choose Yes to invoice for a factoring company.
- Add or select a Factoring Company.
- Enter Factoring Rate and select ‘%’ or ‘$’ on how do you want to calculate the rate.
- Click Generate Invoice.
Here’s an example of how factoring invoice works:
Let’s say your customer owes you on a $20,000 invoice, payable in 60 days. So you factor that invoice to a factoring company. The factoring company advances you 90% of that invoice, or $18,000, and holds the remaining $2,000 as a reserve. Now, your customer pays the invoice, $20,000, to the factoring company. The factoring company takes its factoring fee, $600 (assuming 3%). They pay the balance of $1400 of the invoice to you. The total you receive will be $19,400 ($20,000 - $600).
Watch the video below and learn how to factor an Invoice with Trucklogics.