Invoice Discounting Process – UK Factoring Helpline

In the UK invoice discounting comes under the umbrella of invoice finance. Invoice discounting is a financial product available to businesses in the UK that sell goods and services on credit. It is used to improve a company’s working capital and cash flow position

Invoice discounting is an alternative method to factoring of drawing money against a business’s invoices

The invoice discounter will first check the business by carrying out a mini audit if the firms customers and accounts systems.
After the audit has been passed the invoice discounting company set up a facility which provides a draw down facility to gain access to percentage of the total sale each month.
Every month or week the invoice discounter is notified of the details of the invoices in raised
The invoice discounter requests weekly or monthly electronic bulk downloads sales books or invoice information
On receipt of a sale and invoice information the invoice discounter will make funds available at the agreed percentage rate
The business can then draw down on funds made available.
As cash is received from debtors it is paid to the invoice discounter.
The process is continuous, generating cash availability to the client

Invoice discounting rates are generally equivalent to bank overdraft rates You will pay a fee to the invoice discounter broken down as follows:-

A fee based on a percentage of the value of invoices assigned. Typical fees range from 0.2 per cent of turnover to 0.5 per cent of sale turnover.
An agreed fixed fee
Discount (interest) charges are also paid based on the net amount advanced. These can range from 1.5 to 3 % over base.
The invoice discounting charges are calculated on a daily basis and usually applied monthly.
Credit management fees. These fees range from 0.75 per cent of turnover to 2.5 per cent of sale turnover.
Credit protection charges apply in non recourse invoice discounting as there are higher risks involved.
The business sends out invoices
The business collects the debts
The business manages the entire credit control function
The customers do not need to know that the business uses invoices discounting and can be completely confidential.
The invoice discounter is notified of details of the invoices in bulk.
On receipt of a notification the invoice discounter will make funds available at the agreed percentage rate, say 80 per cent.
The invoice discounter will recalculate the amount available to the client after every transaction.
Invoice financing can be arranged confidentially
Invoice discounting rates and can even be cheaper that traditional bank finance.
An invoice discounting facility offers the option to protect a business from bad debt
Invoice Discounting to be used as a refinancing tool
Under an invoice discounting facility you can get 90% of the value of the invoice straight away.
Receiving cash as soon as a sales invoice is raised is possible under an invoice discounting facility.
Invoice Discounting enables a business freedom to grow at its desired pace.
Invoice Discounting delivers improved cashflow allowing a business compete with larger or more established businesses.
Invoice discounting allows a business the confidence to pay all of its working capital.
Invoice discounting is normally only available to businesses with a proven track record
A business must have an annual turnover of at least £500,000 to qualify for an invoice discounting arrangement.
Invoice discounting firms carry out detailed reviews of the businesses credit history prior to acceptance.
Invoice discounting firms carry out detailed reviews on the profit track record of the business.
Invoice discounting firms have strict rules regarding the quality of sales ledger systems and procedures.
Invoice discounter firms carry out regularly checks on business to confirm that credit control procedures and checks are still effective.
Invoice discounting is not always the cheapest form of finance
Once a business enters into an invoice discounting arrangement, it can be difficult to leave
Most invoice discounting arrangements can tie a business into a long contract.
Invoice discounting is only available to businesses that sell products or services on credit to other businesses.
An Invoice discounting facility is subject to constant reviews
In some industries, financing debts can be associated with a company that is in financial distress. This can result in suppliers becoming reluctant to offer credit terms, which will reverse many of the benefits of the arrangement.
As the finance company takes a legal charge over the sales ledger, the business has fewer assets available to use as collateral for other forms of lending – this may make taking out other loans more expensive or difficult.
As invoice discounting is quite a trusting way of operating a facility and is often subject to fraudulent abuse by dishonest firms.
The cost of the invoice discounting services are expensive
Profit margins are lower for business using invoice discounting
Business that utlise invoice discounting incur extra administration due to the provision of information to the invoice discounting firm.

Please call 0800 597 4757 for advice on invoice discounting. Our team cab source an invoice discounting arrangement for your business because we understand which invoice discounters are best matched with certain businesses. As an invoice discounting customer you will be assigned one of our client managers and guided through the whole invoice finance process.