Invoice Discounting

Invoice discounting and factoring are financial tools available to all companies, it allows a company to receive working capital much faster than using the usual collection methods for account receivables (invoices). In short, invoice factoring helps purchase outstanding invoices and account receivables from companies at a slight discount (as little as 5%) in exchange for cash.

Factoring and Invoice Discounting are not the same

Factoring & Invoice Discounting normally provide finance against outstanding Invoices (debtor balances). Factoring however provides a full sales ledger and collections service under which is the responsibility of the Factor. With Invoice
Discounting you are responsible for administering the sales ledger collections with this customers need not know that you have an Invoice discounting agreement.

Ending a contract with a Factor or Invoice Discounter?

Closure of an invoice discounting of factoring contract will be subject to its terms and conditions. Some companies state in their contract 3 months’ notice which can exercised at any time, some companies demand it to be annually. Full repayment of funds provided by your Factor/Invoice Discounter before you can cancel an agreement.
Free up your invoices | invoice discounting information

Invoice Discounting

Invoice discounting is not the same as factoring. But there are many common advantages.   Invoice discounting gives payment of a percentage of the total amount owing by customers as opposed to factoring which gives payment of a percentage of each individual invoice.
Unlike factoring, Invoice discounting means you are in control of
* Your sales ledger,
* The issuing of statements and
* The collection of cash.
Although the invoice discount company may take a "legal" charge for book debts.
Invoice discounting is also known as
* Confidential Invoice Discounting.
This is because a company’s customers do not know about the invoice discounting
In addition to advances received or money repaid you will pay a monthly charge to the invoice discounter and also pay interest on the net amount advanced.
Invoice Discounting Guidelines
*Invoice Discounting
Invoice discounting gives you complete authority over your sales ledger and keeps your operations a secret form your customer. (You don't want them to think your business is in crisis). This is the main advantage you get from Confidential invoice discounting' collecting your own debts means that your customers need not know of your invoice discounting agreement.

How does it work?

You follow the normal procedure of sending out invoices, statements bills etc. Once the invoice discounter receives the copy of an invoice he/she will advance you a percentage of the invoice value keeping some back until the outstanding invoice has been satisfied. On receipt of payment, from your customer a bank account which is under the wing of your invoice discounter must receive that payment. The invoice discounter will then pay the amount retained in the first funding transaction, less any charges of course.

Requirements

An annual turnover in excess of £500,000 is usually required before an application will be entertained, and your minimum net worth must be £30,000 and must be running at a profit, profit does not always mean that you working capital balance can be maintained through the month, this is why people use Factoring & invoice discounting as an alternative means of corporate funding.
Your books may be audited from time to time (usually quarterly) this ensures that your credit control and debt collection procedures are running smoothly and efficiently.
Non-confidential invoice discounting requirements are usually less intrusive and are accepted more often.

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