A factoring deposit is usually the net cash received after fees, reserves, advances or chargebacks. Recording only that deposit as revenue can understate gross freight revenue and hide the true cost of factoring.
A stronger reconciliation
- Start with the customer invoice or rate confirmation.
- Match the gross invoice amount to the factor’s settlement statement.
- Record factoring fees, reserves and chargebacks separately.
- Match the remaining net amount to the bank deposit.
- Reconcile outstanding invoices and reserve balances at month end.
Records to retain
- Customer invoice and rate confirmation
- Bill of lading and proof of delivery
- Factor settlement or funding statement
- Bank deposit detail
- Reserve and chargeback activity
Account treatment depends on the factoring agreement, including whether receivables are sold with or without recourse. Confirm material conclusions with the appropriate accounting or tax professional.