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When using third party financing you may invoice a client for one amount, but actually collect a lower amount as payment in full for the invoice. The information below will show the recommended practices for processing invoices and payments that involve third party financing. The process will accomplish the following tasks:
Invoice the customer for the full amount of the quoted sale
Reflect the full invoiced amount on the POC Job Analysis report
Show the third party's finance charge as an expense on the POC Job Analysis report
Receive payment from the financing company on the customer's A/R account for the invoiced amount less the finance charge
Credit the customer's A/R account for the amount of the finance charge without affecting the POC Job Analysis report
Example:
A customer purchases $5,000 in services from your company.
The finance company will pay $4,600 to your company and retain $400 as their fee
1. Invoice the customer
• Prepare an invoice for the full amount ($5,000)
• Print it and present to the customer and/or financing company as needed
• Update the invoice to A/R
2. Receive Payment
• Receive the $4,600 payment from the finance company against the invoice. (That will leave a $400 balance due.)
• Create a Credit Memo against the original invoice. A Finance Fee detail line should be created with a quantity of -1, price of $400 and cost of $0.00; charging the GL account of your choice. (The GL account can either reduce income or increase the cost of sales.)
• Update A/R on the Credit Memo. ServMan will now show a balance on the customer's account of $0.00.
3. Add the finance charge amount to the job so that it will be reflected on the POC Job Analysis report (This can be done at any time in the process)
• Create a new order on the job or add a detail line to an existing work order for the Finance Fee. The detail line should have a quantity of 1, price of $0.00 and cost of $400; charging the GL account of your choice. (The GL account will not actually be charged, but must be a valid GL account)
• The Finance Fee amount with show as an expense on the POC Job Analysis report as soon as the order is either Posted to COGS or invoiced