Factoring your Invoices

If you factor your invoices, Tailwind can handle this too.

If you send your invoices to your factoring company so they can stamp an “assignment” notice on them and forward it to the customer for payment, this can be done directly out of Tailwind and Tailwind will send along with the “Attached” Proofs of Delivery along with the invoice.

If your factoring company requests that you show the remittance information (assigning the invoice to them) then Tailwind can handle this also.  Simply reach out to the support team and let them know you need a “Factoring” invoice and they will provide your database with a custom invoice showing your factoring company as the Remit to.

Now that you have sent the invoice off for payment, let’s see how we can show this invoice as paid in Tailwind and take care of the factoring costs.

Every factoring company is different and every one of you has a different agreement with your factoring company so I will deal with the most common scenario which is – that the factoring company keeps a percentage of the invoice.

In the financial world, this is considered a discount on your invoice.  It is not an expense nor a cost of goods, it is a discount from the total amount of your invoice and you will need a “Revenue item” to handle this discount so creating the revenue item to be used to gather these discounts will be your first step.

Within Tailwind, go to the “Gear” icon in the top right-hand corner of the software and choose “Configuration” – Once the Config menu loads across the top of the screen for you, go to Financial – Revenue Items.  Once there, you can use the “Create Revenue Item” button to set this up.

Your revenue item should look like the below screenshot but you can call it whatever you want to.  I am showing the example of using the “Factor Fee”

Now that you have your discount revenue item created, it is time to see how we can receive payments on these factored invoices and send those credits thru to our revenue.

Using the left navigation bar, go to “AR” and then click on “Incoming Payment Wizard”.  This is where you can receive payments and mark the invoice as paid, keeping your Accounts Receivable up to date so even if your invoice is not factored, this is where you will receive all payments on invoices issued. You can select the customer whose payment you want to process or you can simply enter the Order number and search for that particular invoice

Complete the remaining fields by entering your factoring companies check number and ACH payment number, the date you are receiving the payment and the actual amount you are receiving.  Not the outstanding amount of the invoice, the amount you are receiving after the factoring company takes their percentage.

Once this data is entered, click the “Show Invoices” button and the software will show you all outstanding invoices for this particular customer.  Find the invoice you are wanting to pay and switch the toggle to the left of the invoice number to green.  This will put the total outstanding amount in the “Applied” field and that is not what you are receiving so you will overwrite this field and enter the actual amount you are receiving against this invoice.  Once that is done, it will show the amount outstanding in the “Remaining” field (this is the actual amount of your factor fees on this particular invoice) and in the field right next to the Remaining amount, you will choose “Write off” and then choose the Revenue item that you created in the first steps – typically called Factor Fee.

This will allow the software to mark the invoice as fully paid and will send the factor fees (cost to you) to one specific revenue item, allowing you to always know what your factoring costs are.