Invoice discounting

If your business is already large enough to afford staff and systems to efficiently manage and collect outstanding invoices, then the full factoring services may not be what you need.

Instead, invoice discounting may suit your needs more.

It is identical to factoring except that the sales ledger management - the collection responsibility - remains with your company.

Therefore, the service of providing the instant cash flow against invoices is not disclosed to your customers.

The invoice discounter will check the business, its systems and its customers before agreeing to provide the service.

Each month, more money is advanced by the discounter or repaid by you. This will depend on whether the total amount owing has gone up or down.

If the invoice discounter agrees to advance 80 per cent of the total owing and the total of outstanding invoices is steadily changing, then so will the amount you receive. If the outstanding debt drops month on month, you must repay 80 per cent of the fall in debt. If the debt rises month on month, you will receive 80 per cent of the increase.

And more and more firms are opting for invoice discounting instead of traditional overdrafts, described by some to be a ‘company straightjacket.'

Many types of firms can benefit from the advantages of invoice discounting including manufacturing, transport and haulage, wholesale and business services and many more.