What is invoice factoring and how does it get recorded in my books?

Invoice factoring is selling a client invoice you haven't yet collected to a financing company for an immediate percentage of its value, instead of waiting for the due date. If the agreement is non-recourse — meaning the financier bears the full risk of non-payment — accounting treats it as a genuine sale of the receivable: you remove the invoice from your assets and record the difference as a financing expense. If it's recourse — meaning you're still on the hook if the client doesn't pay — it's recorded as a loan secured by the receivable, not a sale, and the invoice stays on your books as an asset.

That distinction matters a lot because it affects how your financial statements look (is the receivable still showing as an asset or not) and how the cost is classified (a financing expense from a sale, versus loan interest). At RASEEKH, we help you review a factoring agreement before you sign it, so you understand its accounting and tax impact precisely before committing to it.