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Factor a Procedure with 3rd Party Debtor Finance

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Most financial institutions offer debtor finance solutions.

The details of the solutions are likely to vary between institutions, but most will advance approximately 80% of the value of your approved sales invoices, usually within 24 hours.

When the invoices are paid by the customer, the remaining balance is released.

There is a limit on the facility, ie. the debtor finance provider will advance up to the agreed total debtor finance facility value at any time.

Some institutions deduct their fee from the final payment, whilst others deduct the monthly fee from your bank account.

Interest is charged on the value of the funds advanced.



This explanation is generic, and not specific to any one provider, however the standard procedure is approximately as follows:

The PROVIDER typically wants your full sales ledger (except COD sales).

You should have an in-house credit application process which involves doing a credit check. The provider will usually undertake a search on your customers prior to approving them for inclusion in the facility.

You send invoices to the provider at the agreed intervals (usually weekly, or whenever there are fresh invoices) for funds to be released.

In addition to your normal trading bank account, there is a separate bank account in your company name that is part of the facility, and your customers must pay into this bank account. You have read only access to this account so you can see who has paid you.

There is also a line of credit account for the facility, ie. the value of the funds advanced to you.

Each day the provider will sweep any debtor funds received via the debtor finance bank account into the line of credit account to reduce the balance. The line of credit account will reflect the total amount advanced to you at any given time.

You can request a draw-down (or out-payment) up to the value of the balance available on the facility, eg. the agreed limit of the facility is $200,000 but the current liability is only $150,000, so based on funds paid by your customers you can request up to $50,000 to be transferred to your tradinu bank account.


Set Up in Jim2

1.Add a card file non-report group, eg. Debtor Finance.

2.Update the approved customer card files, and ensure the approved customers are put into the Debtor Finance card file group.

3.Add a new GL asset account (Type – Detail Cheque Account (Postable) ) for the debtor finance bank account that the customers will pay into, eg. 1-XXXX Debtor Finance bank account, with Default Tax Code set to X.

4.Add a new GL liability account (Type – Detail Credit Card Account (Postable) ) for the line of credit extended, eg. 2-XXXX Debtor Finance facility with the Default Tax Code set to X.


Procedure in Jim2

Account sales are made in the normal way, ie. add a job and invoice the customer.

At the agreed interval (weekly or at the end of each day, if there are new invoices), run the sales register for the period, and filter by the card file non report group Debtor Finance, so only sales to approved customers will be included in the list.

Any returns from customer should also be included in the list.

Right click in the list and select Export Data from the drop-down options, save as a spreadsheet file to upload to your Provider.

Each day, check the debtor finance bank account and enter any debtor payments received into Jim2, ensuring they are processed into the new 1-XXXX Debtor Finance bank account.

Add a cheque to record any transfer of funds from the 1-XXXX Debtor Finance bank account to the 2-XXXX Debtor Finance facility.

Add a cheque to record any draw-down from the 2-XXXX Debtor Finance facility to your 1-XXXX trading bank account.

Add the fees and interest charged either by a cheque or via the Bank Entry icon in the Bank Reconciliation screen.


Refer to your debtor finance provider for the specific details of your agreement.