Financing and Flooring With The Same Supplier

As your business grows, you will more frequently find yourself in a position where you have a floored unit, and when you sell that unit, your customer uses the same company to finance their purchase.  And when all is said and done, all you’ve received from the finance company is the difference between the financed amount, and the amount you owed the flooring company.

Lizzy is actually well aware that this can be a common occurrence, and is trained in such matters.  For our description here, we will use the term receivable to refer to the amount of money that was financed by the customer when the unit was purchased ( lets say $10,000 as an example ), and we will use the term payable to refer to the amount of money that you have floored the unit for, and you owe to your finance supplier ( lets say $7500 for our example).  And for simplicity’s sake, we will say that this is all being done through AHFC ( American Honda Finance Company ).

First, you should have received some form of payment from AHFC ( usually, you will have made some profit over the amount you owe on the unit ), so apply that amount against the receivable.  In our example, we should receive some type of payment ( via check or EFT notice ) that AHFC paid us $2500 ( the difference between what was financed, and what we owed on the unit ).  Naturally, since they owe us $10000, but we owe them $7500, they aren’t going to send us $10000 and wait for us to send them back $7500.  They will just take their $7500 immediately, and send us the difference.

So we go into our receivables for AHFC, and apply the $2500 against the $10000 balance, leaving us with a $7500 receivable.

In order to pay the payable owed to American Honda Finance Company, we need to take the receivable that was created (as AHFC owes us for the customer deal) and move it from a customer receivable (customers can’t pay you with a credit memo) to a supplier receivable so we can take a credit memo payment and apply it to your payable. To do this, you are going to click the “beaker” button in the Actions section. This will $0.00 out the customer a/r balance ( $7500 ) and create a refund receivable for that amount.

Once you do this, it will put it on the Refunds area, and you can pay the receivable with a credit memo that will then show up in your payable section for use.

You will then be able to use the newly created credit memo, and apply it as a payment against the outstanding $7500 AHFC Payable that Lizzy says you owe for the unit.

Fini!