Has anyone ever factored invocies before? I searched for factoring and variations of this but no previous discussions came up. I'm wondering what my j/e to record the factored invocies should be. For instance I factor 100K of receivables to Joe Financial Group. They give me 80K and I take that to the bank. The 20% is a discount. I guess my real question is, how do I book that discount? Since in the end I will receive most of that back as a rebate (because they will only potentially earn a portion of that discount depending on how quickly my customers pay these invoices, right?). Is my original j/e credit AR the full 100K, Dr Loan payable the 80K and dr discount payable for the entire amount of 20K?
Then when Joe Finanacial Group has collected the full 100K they figure out their earned discount based on whatever daily rate we agreed to at the original purchase and they send me a check for the net (20K less discount earned of 3K). Then at that time I dr the bank for 17K, dr interest exp for 3K and cr that discount payable the full 20k?
I'm lost! Any help would be appreciated! Thanks.