The subject is much simpler than the situation. I will lay out the facts:
Our company factored $335,674.80 in receivables
The Factor advanced us $251,756.10 in cash advance (75%) and held the difference in reserve.
The net amount that our bank received was $234,972.36 after $250 in application fee, 25 in wire fee, and the factory held an escrow of $16,783.74 (5%) to be paid back as well after the invoices were settled (kind of a secondary reserve??).
The factor fee was at 3% of the total cost of the invoices for $10,070.24
This is where it gets tricky. In order to get our factor paid back quicker (factor fee increases after 30 days) we “auctioned” off invoices for the factor through our customers web portal. We discounted a total of $359,996.40 in invoices at 1.3% from this same customer. This allowed for $355,316.45 in early payment to the factor. However, we had given the customer credit returns and markdowns for an amount of $60,829.94 and they took this credit from our payment. In the end, we were able to have $294,486.51 wired directly to our factor (more than we actually owed. There was no way to split this payment up). In the end the factor has just wired us back $49,718.91 in rebate monies.
Are you still with me? Good. I have no idea where to get started on making journal entries when the accounting got this complicated. Please help me out!!!
**If you are confused as to the reason we factored our invoices and then “auctioned” them off right away is because of the terms of the PO from the customer. The PO terms were FOB China and Net 30 ROG at customer warehouse. We were able to factor the invoices as soon as the ships left china, but the due date clock did not start ticking until they were received at their warehouse in the U.S.A. We needed to secure funding to pay our suppliers early after product left China.
Our company factored $335,674.80 in receivables
The Factor advanced us $251,756.10 in cash advance (75%) and held the difference in reserve.
The net amount that our bank received was $234,972.36 after $250 in application fee, 25 in wire fee, and the factory held an escrow of $16,783.74 (5%) to be paid back as well after the invoices were settled (kind of a secondary reserve??).
The factor fee was at 3% of the total cost of the invoices for $10,070.24
This is where it gets tricky. In order to get our factor paid back quicker (factor fee increases after 30 days) we “auctioned” off invoices for the factor through our customers web portal. We discounted a total of $359,996.40 in invoices at 1.3% from this same customer. This allowed for $355,316.45 in early payment to the factor. However, we had given the customer credit returns and markdowns for an amount of $60,829.94 and they took this credit from our payment. In the end, we were able to have $294,486.51 wired directly to our factor (more than we actually owed. There was no way to split this payment up). In the end the factor has just wired us back $49,718.91 in rebate monies.
Are you still with me? Good. I have no idea where to get started on making journal entries when the accounting got this complicated. Please help me out!!!
**If you are confused as to the reason we factored our invoices and then “auctioned” them off right away is because of the terms of the PO from the customer. The PO terms were FOB China and Net 30 ROG at customer warehouse. We were able to factor the invoices as soon as the ships left china, but the due date clock did not start ticking until they were received at their warehouse in the U.S.A. We needed to secure funding to pay our suppliers early after product left China.