Factoring Product is an essential setup component, and every factoring agreement requires a factoring product selection.

To set up a factoring product:

1. Search for "Factoring Products" and select the related link to open the existing product list.
2. Choose "New" to create a new factoring product. The Factoring Product card contains several FastTabs:

General

This section contains general details about the product.

• Code and Description - Uniquely define the factoring product code and description.
• Valid From and Valid To - Specify when new agreements using this product can be created.
• Factoring Type - Select Conventional, Reverse, or Loan type. This affects agreement behavior.
• Currency Code - Select to allow this product's invoices in a foreign currency.
• Currency Exchange Rate Type - Choose Currency Exchange Rate or Fixed Contract Currency.
• Detail Customer Entries - If enabled, splits customer ledger entries on factoring invoice posting.

Credit Limit

In this section, users can define how credit limit calculations and violation rules work in specific factoring products.

• Vendor Credit Limit Calculation Method – Calculate available and used Vendor Credit Limit based on Advance Amount or Invoice Amount.
• Debtor Credit Limit Calculation Method – Calculate available and used Debtor Credit Limit based on Debtor Outstanding or Advance Paid.
• Exclude Term Charges from Cr. Limit - Exclude term charges from the credit limit. By default, invoiced but unpaid term charges towards the client are calculated as utilized Credit Limit.
• Vendor or Debtor Limit Check Rules - Specify whether the limit violation should show a message or an error for each level.

Advance, Commission & Interest

In this section, users define generic fee terms for specific factoring products. When a new Factoring Agreement is created, those values will be automatically populated after selecting the Factoring Product. However, they can be tweaked for specific Factoring Agreements later on. More details are provided in the section Creating a New Factoring Agreement.

• Advance is Allowed - Specifies if vendor advances are allowed (for conventional factoring).
• Advance % - Percentage of invoice amount that can be advanced.
• Comm. (Upfront) is Allowed - This allows one-time upfront commission fees per invoice. For reverse factoring, an upfront commission serves as an invoice discount.
• Commission (Upfront) Type - Upfront commission as a percentage or fixed amount.
• Commission % (Upfront) - The Upfront commission percentage value for conventional factoring, and the invoice discount percentage value for reverse factoring.
• Commission Amount (Upfront) - Upfront commission is a fixed value.
• Comm. (Deferred) is Allowed - Allows deferred commission (usually for loans).
• Commission % (Deferred) - Deferred commission percentage.
• Commission Deferral (Days) - Number of days to defer commission.
• Interest Is Allowed - Allows interest calculation (not for reverse factoring).
• Interest % (APR) - Annual percentage rate for interest.
• Interest Calculation Method - Specify 360/Actual, 365/Actual or Actual/Actual days calculation.
• Minimum Interest Type - Minimum interest is used to charge interest even if the invoice was paid back before the due date. Available values for calculations are Not Applies, Fixed Amount, or Number of Days.
• Minimum Interest Value - Minimum interest amount or day count.
• Increased Interest Is Allowed - Allows increased interest after the due date.
• Increased Interest % (APR) - Annual percentage rate for increased interest.
• Postpone Increased Interest (Days) - Number of days to postpone increased interest.
• Penalty Interest % (Daily) - Daily percentage for penalty interest.

Accounting

As SOFT4Factoring has in-built accounting software, Microsoft Dynamics 365 Business Central, this section sets up various accounting-related parameters. You can also continue using your accounting software if you have one. In that case, financial data download/upload to your accounting system or direct integration through API would be used. However, having all data in one system assures data consistency throughout your entire factoring process and decreases system maintenance and support costs. You can read more about financial accounting in Microsoft Dynamics 365 Business Central here: https://learn.microsoft.com/en-us/dynamics365/business-central/finance.

The financial accounting posting setup is done according to the local tax and legal requirements (e.g., you might not need to set up VAT in certain countries).

• Customer Posting Group - General ledger posting group for customers.
• Vendor Posting Group - General ledger posting group for vendors.
• Combine Charges on Invoice - Combine different charge types on one invoice if enabled.
• Invoice Interest After Invoice Repayment Only - Only invoice interest after an invoice is repaid by the debtor.
• Invoice Upfront Commissions on Disbursement - Invoice upfront commissions when the advance is disbursed.
• Upfront Commission Revenue (PL) - Income account for upfront commissions.
• Deferred Commission Revenue (PL) - Income account for deferred commissions.
• Interest Revenue (PL) - Income account for interest.
• Penalty Interest Revenue (PL) - Income account for penalty interest.
• Commission (Upfront) VAT Product Group - VAT product group for upfront commissions.
• Commission (Deferred) VAT Product Group - VAT product group for deferred commissions.
• Interest VAT Product Group - VAT product group for interest.
• Penalty Interest VAT Product Group - VAT product group for penalty interest.
• Invoice Type for Factoring - Different invoice layout for factoring invoices.
• Invoice Type for Commission - Different layout for commission invoices.
• Invoice Type for Deferred Commission - Different layout for deferred commission invoices.
• Invoice Type for Interest - Different layout for interest invoices.
• Invoice Type for Penalty Interest - Different layout for penalty interest invoices.

Automatic Posting of Collections from Reserve

If one or more Automatic Postings of Collections from Reserve is turned on, it means that when the specific fee is invoiced, the system does not expect your client to pay it. Instead, it will be automatically settled with the payable reserve. Therefore, when the system suggests reserve payments, the amount will be automatically deducted.

• Upfront Commissions - Deduct upfront commissions from the reserve if checked.
• Deferred Commissions - Deduct deferred commissions from the reserve if checked.
• Interest - Deduct interest from the reserve if checked.

Automatic Posting of Collections from Advance

If one or more Automatic Postings of Collections from Advance is turned on, it means that when the specific fee is invoiced, the system does not expect it to be paid by your client. Instead, it will be automatically settled with the payable in advance. Therefore, when the system suggests advance payments, the amount will be automatically deducted.

• Upfront Commissions - Deduct upfront commissions from the reserve if checked.

Document Templates

Requires additional module license “Document Management”.

• Notification Letter Doc. Type - Document type for a notification letter template.
• Notification Letter Template - The notification letter template is to be used.
• Confirmation Letter Doc. Type - Document type for confirmation letter template.
• Confirmation Letter Template - Confirmation letter template to use.
• Agreement Doc. Type - Document type for agreement document template.
• Agreement Doc. Template - Agreement document template to use.

Once all applicable fields are populated, the factoring product setup is complete. You can then associate this product with factoring agreements.