Invoice Discounting
Another way of raising funds from your company’s invoices.
Invoice discounting is very similar to invoice factoring, in that it enables you to access instant cash tied up in your outstanding invoices. However, there is a crucial difference in that it enables your business to retain control over all of its invoice administration and debt management.
Is invoice discounting just another form of invoice factoring?
As with invoice factoring, the process involves you raising an invoice and then being given a proportion of the total amount from the lender. However, it differs from invoice factoring in that your customer may not be aware of you having taken on cash flow finance. Unlike with the invoice factoring process, you remain in control of your sales ledger, collecting payments and sending out reminders in the usual way.Practical Application Example
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The process works similarly to invoice factoring, in that you supply your goods or services to the customer in the usual way, followed by sending them an invoice. However, this invoice will not be payable to the invoice discounting company, but instead to a nominee bank account administered by that company. You will be given up to 85% of the invoice amount within 24 hours, but it will be your responsibility to collect and chase the invoice payment from your customer. When the customer settles the invoice in full by making a payment to the nominee account, you will receive the remaining balance, with the invoice discounting company deducting a fee. ”
