Wondering how your FundThrough Velocity advances should be categorized for bookkeeping? Read on!

Let us begin by walking you through an example. Let’s imagine your business has $100,000 of invoices outstanding, on net 30 terms, and would like to make use of that money to grow your business. A factoring agreement is made with FundThrough, in which you are charged a transaction fee of 2.5%

Assumptions:

-$100,000 in invoices factored

-$100,000 gross advance

-$2,500 transaction fee (2.5% per 30 day term)

-Cash advance will be the gross advance less the transaction fee ($100,000 - $2,500 = $97,500)

-Your customer pays in 30 days

Step 1: Record the advance of the Accounts Receivable:

  • Create a short-term liability account called: Due to FundThrough

  • Record the transaction at the time of the advance:

A. [debit] Cash for the amount of the advance received

B. [debit] Factoring expense and any bank charges

C. [credit] the short-term liability account called Due to FundThrough for the total amount factored

DEBIT

CREDIT

  1. Cash - $97,500

  1. Factoring Expense - $2,500

  1. Due to FundThrough $100,000

Step 2: Record the Collection

  • Record the transaction at the time of invoice payment:

  1. [debit] Due to FundThrough to reduce the balance owed to FundThrough

  2. [credit] Accounts Receivable for the paid invoice amount.

DEBIT

CREDIT

  1. Due to FundThrough $100,000

  1. Accounts Receivable $100,000

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