Free Factoring and Invoice Discounting Advice

What is invoice discounting?

Invoice discounting is an alternative way of drawing money against your invoices. It works in a similar way to factoring; however the business retains control over the collection of the invoices.

Advantages and disadvantages of invoice discounting

• Invoice discounting provides a cost-effective way for businesses to improve cashflow.
• An Invoice discounting facility can help a business achieve better cashflow
• Financial planning is far easier with an invoice discounting company on board.
• Businesses using an invoice discounting facility can compete with larger and more established businesses.
• By using an invoice discounting facility cash can be accessed quickly

The cost of factoring and invoice discounting

• There are lots factoring and invoice discounting firms in the UK so make sure you shop around to get the best deal. Consider using a factoring and invoice discounting broker.
• Factoring and invoice discounting services have several costs attached to then such as interest, factoring and invoice discounting fees and various other value added service.
• A business using factoring and invoice discounting will have “discount charges”, these range from 1.5 to 3 percent over base rate. They are similar to interest costs that a bank would charge.
• Factoring and invoice discounting incurs credit management fees and are usually based on turnover or sales.
• Factoring and invoice discounting can also charge credit protection charges which guarantee against bad debt.
• A factoring and invoice discounting is a clever and money saving way of outsourcing the whole sales ledger, invoicing and book debt collection process.
• In terms of cashflow, factoring and invoice discounting can be very cost effective
• When looking into factoring and invoice discounting don’t just look at the financial costs but also consider quality of service.
• Factoring and invoice discounting often have a lot of small print which often translated into hidden costs and factoring and invoice discounting fees.
• Factoring and invoice discounting require long notice and cancellation periods which have lots of costs attached. Make sure you negotiate this point if you are unhappy as you may save costs here.