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Connecting to QuickBooks Desktop

Connecting to QuickBooks Desktop

Written by Support
Updated over a year ago

Please see the instructions below on how to set up for QuickBooks Desktop, you should only need to do this once. 

Check your accounting type

This guide assumes you are using "accrual accounting." Not sure what accounting method you are using? From the home screen, click the gear in the top right, next to your company name. Select Company Settings. On this screen you will see Accounting Method, which will either say Cash or Accrual.

Set up factoring accounts

We will create two accounts that we will use during transactions.

Create your factoring advances account

This account will record the invoice advances you have received. Go to Transactions>Chart of Accounts and hit New in the top right corner. Set the details to match the following:

Category type: Other Current Liabilities
Detail Type: Line of Credit
Name: Factoring advances or a similar name
Starting balance: $0

Check that your account screen looks like the following, then click the blue Save and close.

Create your factoring fees account

This account will record the invoice factoring fees you have received. Go to Transactions>Chart of Accounts and hit New in the top right corner. Set the details to match the following:

Category type: Expenses
Detail type: Finance Costs
Name: Factoring Fees or similar

Check that your account screen looks like the following, then click the blue Save and close.

Now that your QuickBooks accounts are set up, we’ll walk through the four QuickBook steps to account for factoring.


Step 1: Create an invoice

  • When you do work, create and send an invoice to your clients just like normal. For our example, we will use an invoice (#1041) sent to a customer for $10,000. We will factor this invoice for 3 weeks at an 85% advance rate and 1%/week fee.


Step 2: Record the advance

  • Create a new bank deposit by clicking the + at the top of the screen as shown below.


Fill out the deposit form using the following details:

  • In the top left, select the bank account the advance is going to (we will use Checking for this example)

  • In Add New Deposits, fill out a line with the following information:

    Account: Factoring Advances

  • Description: this is not required, but typing the customer invoice # here will help you keep track of the transactions

  • Reference Number: not required, but recommended you enter the invoice #

    Amount: the amount of your advance (in our case, $8,500)

  • Click save and close in the bottom right to record the transaction

Below is our example deposit form all filled in. (Note that we did not check any boxes under Select Existing Payments.)

When the customer pays, we close out the transaction by doing the third and fourth actions: we Receive Payment from the customer, then we do a bank deposit that accounts for the fees.


Step 3:  Receiving a payment

  • Go to Receive Payment by clicking the + at the top of the screen as shown below.

  • Fill out the Receive Payment form with the following details:

  • Choose the correct customer in the top left

  • Reference number: it will help to enter the invoice number (#1041 in our example)

  • Deposit to: select Undeposited Funds

  • Check the box next to the invoice you factored

  • Click the blue Save and new (or Save and close) button in the bottom right to record the transaction.

Below is our example form:

Step 4: Balance accounts

  • Create a new bank deposit. Fill out the deposit form with the following details:

    • In the top left, select the bank account that you want the rest of the funds to go to (in our example, Checking)

    • In the Select Existing Payments section, check the box next to the payment that you just recorded in the previous step. (This is where the Reference Number comes in handy: in this example, we have multiple payments from our customer, so seeing an existing payment with #1041 helps us pick the correct payment.)

    • Fill out a line in the Add New Deposits section:

    • ​Account: Factoring Advances (or your name for this Current Liabilities account)

      Ref No.: fill out the invoice number if you wish

    • Amount: enter the value of the advance as a NEGATIVE number. (In our example, we received an $8,500 advance, so we enter -8,500)

    • Fill out a second line in Add New Deposits:

    • Account: Factoring Fees (or your name for this Expense account)

    • Ref No.: fill out the invoice number if you wish

    • Amount: enter the total accrued fees as a NEGATIVE number. (In our example, our cost is 3 weeks * 1%/week * $10,000 = $300, so we enter -300. Hint: You can always find these numbers in the Reports tab of your Fluid dashboard)

    • Click the Save and close button in the bottom right

*Please ​note: that our deposit form shows that $1,200 will be deposited to our bank account. That’s because 15% (or $1,500) was held back from our original invoice until the customer paid. Now that it is paid, Fluid is passing along this amount minus fees: $1,500 - $300 = $1,200. 

That’s all you need. But if you’re interested in digging into the details of how your accounts changed at each step, here you go. These use the numbers from our example invoice. ($10,000, 85% advance, 3 weeks, 1% fee/week.)

Done!

Below is our example bank deposit form:

After Step 1 (invoicing):

Accounts Receivable (current asset): $10,000

After Step 2 (recording the Fluid advance of $8,500):

Cash (asset): $8,500
Accounts Receivable (current asset): $10,000
Factoring Advances (current liability): $8,500

After Step 3 (recorded customer payment):

Cash (asset): $8,500
Undeposited Funds (current asset): $10,000
Accounts Receivable (current asset): $0
Factoring Advances (current liability): $8,500

After Step 4 (our ending bank deposit):

Cash (asset): $9,700
Factoring Fees (expense): $300