Invoice Discounting works in a similar fashion to factoring. A funding solution is granted enabling a proportion of the value of outstanding invoices to be released before the invoice is paid by the customer, freeing locked up capital.
As with factoring you can receive funding at an agreed percentage within 24 hours, minus the invoice discounters fee. The option can significantly improve the position of your company as it enhances funding control and can protect against customer insolvency with bad debt protection.
How Invoice Discounting works
Say for example your company has £100,000 in unpaid invoices. These are raised in the normal way and details sent to your discounting company. You will then be paid your agreed percentage less their fee and the remaining balance is returned upon full payment. You remain in control of the credit function maintaining customer relationships and therefore keep costs to a minimum.
Invoice discounting is a much more flexible process than obtaining funding from other sources and it can be done in a way that does not alert your customers.
Is invoice discounting suitable for me?
Invoice discounting is suitable for any size company from the smaller start-ups to larger companies as long as there is an established accounts department to deal with payments and invoices.
Advantages of invoice discounting at a glance:
- You are in control
- It retains confidentiality
- It can dramatically improve cash flow
- You raise cash against invoices already issued
- Cash can be accessible within 24 hours