Free Factoring and Invoice Discounting Advice

Free Factoring and Invoice Discounting Advice

This gives information on how factoring and invoice discounting work, the advantages and disadvantages, different types of factoring and invoice discounting, the cost, and how to choose a factor or discounter. Please feel free to read this section and call 0800 597 4757 for more information on factoring and invoice discounting.

What is factoring?

Factoring is the process of selling invoices to a factoring company. The idea is that the business using factoring gets up to 90% of the value of the invoice upfront and then the balance (less a factoring fee) when the factoring company collects the balance of the invoice.

Advantages and disadvantages of factoring

  • The business gets cash quickly by factoring its invoices
  • The business avoids the whole collection process by using a factoring company.
  • A business using factoring never has cash flow problems relating to collecting debts.
  • Factoring reduces the gross profit of a business
  • Customers have to deal with the factoring company and they may not like that.
  • A business using factoring may have difficulty borrowing from other sources because no security of book debts can be offered.

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.

How factoring and invoice discounting can improve a business.

  • Using a factoring and invoice discounting is a positive step towards generating a healthy cashflow
  • In business managing cashflow is paramount and so factoring and invoice discounting can make a huge difference.
  • Factoring and invoice discounting releases as much cash as possible for capital investment
  • Factoring and invoice discounting can give entrepreneurs confidence to trade and compete with large established businesses.
  • Factoring and invoice discounting firms work closely with businesses and this means a built in business adviser to help assess if a business is viable and has a future.
  • Factoring and invoice discounting is good value when compared to the advantages gained against the costs.
  • Factoring and invoice discounting means we can access the cash owed by customers almost immediately – within 24 hours of an invoice being submitted if necessary.
  • A factoring and invoice discounting facility enables a business to plan ahead and make decisions
  • Factoring and invoice discounting keeps financial planning at the top of our agenda of business owners.

Business is unpredictable at the best of times. The factoring helpline specialise in finding Small and Medium sized businesses the right forms of business finance and helping a factoring company. Call 0800 597 4757 for help finding the best small business factoring quote.

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