Invoice discounting is the practice of using a company’s unpaid sales invoices as collateral for a short-term loan, which is issued by a bank or a finance company.

To access the Invoice discounting list, go to:

Home > Accounting > Banking and Payments > Invoice Discounting

1. Prerequisites

To record invoice discounting transactions, you need to create the following ledgers:

1. Short Term Loan: This is a ledger categorized under the ‘Current Liabilities’ > ‘Loans (Liabilities)’ group, representing the loan.
2. Bank Account Charges: This is an expense ledger for fees charged by the bank.
3. Accounts Receivable Credit Account: This is a control account categorized as receivable.
4. Accounts Receivable Discounted Account: This is a receivable account designated for invoices that have been discounted.
5. Accounts Receivable Unpaid Account: This is a receivable account for invoices that were discounted and remain unpaid even after the loan period expires.

2. How to Post an Invoice Discounting Transaction

1. Go to the Invoice Discounting list, click on New.
2. Enter Posting Date and Loan Start Date. Enter the Loan Period in days.
3. Select invoices either manually in the table or by clicking on the ‘Get Invoices’ button on the top right.
4. Select Short Term Loan Account, Bank Account, and Bank Charges Account.
5. Select Accounts Receivable Credit Account, Accounts Receivable Discounted Account and Accounts Receivable Unpaid Account.
6. Click on Save then Submit.
7. After submitting the Invoice Discounting form, click on the Disburse Loan.

You’ll be taken to a Journal Entry screen. Save and Submit the Journal Entry.

2. Features

2.1 Import Invoices

Click the “Get Invoices” button to import invoices. You can filter invoices based on specific criteria such as:

• Invoices generated for a particular customer.
• Date range during which the invoices were issued.
• Minimum and maximum invoice amounts.

You can apply multiple filters simultaneously to refine your search.

2.2 Closing the Loan

When repaying the loan at the end of the loan period or earlier, you can update it by selecting the “Close Loan” button. The system will generate the Journal Entry. Please review it carefully before submission.

2.3 Auto Update of Ledgers at the end of Loan Period