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Xero invoicing8/5/2023 20% of the funds are paid once the debt is collected by the provider.You pay an agreed percentage to the provider to cover their fee. 80% of the funds are loaned to you by the finance provider.You sell this invoice to the finance provider.When you start invoice factoring, the process changes: You reconcile the incoming payment on your statement against the relevant invoice.You raise an invoice and send it to the customer.The problem is that invoice financing muddies the process of money coming in and going out of your business bank account. It’s where cash goes out of the business. Accounts Payable – this is money you owe to your suppliers.In a nutshell, this is where cash comes into the business. Accounts Receivable – this is money that’s owed to you by your customers, so it’s where customer invoices sit.When it comes to incoming and outgoing money, your finances are split into two functions: The key problem lies in the basics of your accounting records and logs transactions. So far, so good, right? But once you’ve sold your invoices, received the initial funds and have been paid the remaining percentage, how do you log and reconcile the transactions in Xero? Why is logging invoice financing so problematic? If you’d like to find out whether invoice financing could benefit your business, visit Fluidly’s funding page.
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