Invoice Discounting: What it is and how it works

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invoice discounting

Finally, businesses looking for a flexible form of finance that grows with their sales will find invoice discounting a compelling option. Whether you’re a small business looking for financial support to fuel growth, or a larger company seeking to improve cash flow and liquidity, discounting could be the right choice for you. Next, contact several invoice discounting providers and compare their services and fees. These will be anonymous in most cases but may still be useful in helping you decide which company to use. Talk to your accountant before making your final decision – they may have useful advice. Invoice factoring can be non-recourse, which means that if you sell an invoice to a factoring company but the customer doesn’t pay, you won’t have to pay back the money yourself.

In the inception itself, no business would wish to have negative profit levels. Once you’ve signed up with your chosen invoice discounting company, they will guide you through the process. It’s almost impossible for small businesses to use a selective method as many invoice discounting companies prefer to spread their risk as widely as possible.

How long can I borrow money for?

Get a quote online or call us on the freephone number below to have a chat with one of our experts. Choose which invoices you’d like to fund and access a suite of useful risk insight tools to help protect you from the risk of late payment. Invoice Discounting, when combined with our Debtor Protection service, can mitigate against the impact of late or non-payment from your customers. Below is a step-by-step guide that will help you to implement invoice discounting in your business.

  • Vivek Seda is the Asset Based Lending & Property Team Lead at Funding Options.
  • Through their invoice discounting service, you can release up to 100% of the unpaid invoice value.
  • Businesses in sectors with long payment terms, such as manufacturing and recruitment, can also benefit significantly from invoice discounting.
  • Employing digitally secure and robust data protection methods, we ensure that your sensitive financial data remains confidential and protected.

This could be ranging from; dispute, product reject/return, discount, penalties. Joe’s customer settles the invoice a few weeks later, paying £10,000 into a trust account controlled by the lender. With confidential facilities, from the customer’s point of view it will look like they’re paying Joe directly.

What is Invoice Discounting? [Implementation Steps + Advantages]

Sending back documents and answering questions clearly will ensure that the process runs as quickly and smoothly as possible. They are providing the correct supporting information upfront, allowing enough time for things to complete and answering questions quickly and efficiently. The application and set-up process can take The Best Guide to Bookkeeping for Nonprofits up to a couple of weeks to allow them to undertake the relevant checks and to get you set up on their online systems. The amount you can borrow will also depend on the provider’s terms and their assessment of your eligibility and credit rating. Advance rate – the % of the invoice value that Financier is willing to finance.

Once you’ve signed up with your chosen invoice discounting company, they will guide you through the process. This includes setting up payments to you, arranging a trust account for customer payments (if required) and linking into your invoicing process so that you get paid as quickly as possible. Usually, most or all of this can be done online if you’re using cloud-based invoicing software. From an operational perspective, the borrower sends an accounts receivable report to the finance company at least once a month, aggregating receivables into the categories required by the finance company. The finance company uses this information to adjust the amount of debt that it is willing to loan the borrower. The borrower retains control over the accounts receivable, which means that it is responsible for extending credit to customers, invoicing them, and collecting from them.

No Effect on Business Relations

Advantedge’s Law Firm Accounting and Bookkeeping: Tips and Best Practices service provides access to the funding tied up in unpaid invoices. When you raise an invoice you would upload the invoice on to your online account and if it is before midday you will receive the funding the same day once the transaction is approved. You can access up to 90% of your invoice value from invoice discounting with Advantedge and you will receive the balance minus their fee once the customer pays. IGF Invoice Finance is an experienced financial services provider that offers invoice finance and asset-based lending solutions to small to medium-sized businesses. They offer flexible solutions to access working capital through their tailored financial solutions. HSBC’s invoice discounting service allows you to maintain control of your finances as you will retain control of your sales ledger and all communications for your customers.