Factoring and Invoice Discounting services are both available, and which one you want depends on how much of the admin work you’re willing to take on – the costs are very different, but how much it would cost you to handle raising invoices and managing the funding cycle is also a factor.
Many agencies also insure their debtor books – but, again, this is another cost, and for large debtor books or for start-up agencies the cost can be significant.
Invoice financing is where a third party agrees to buy your unpaid invoices for a fee, meaning that you no longer have to wait the typical 30-90 day to receive payment. There are 2 types of invoice financing in the UK; invoice factoring and invoice discounting.
Invoice factoring allows you to use your accounts receivable as collateral in return for ready cash. You continue to provide goods and services to your clients as normal, but will get up to 85% of the value of your client invoices up front, with the remaining value paid back when your invoices have been collected, minus a small service charge (typically no more than 1.5-2.5% of your invoices).
No, this is not allowed. You can only have one invoice finance provider at any one time.
Almost any type of business can benefit from invoice factoring services. However, it is particularly valuable for fast-growing businesses with cash-flow problems due to late-paying customers or other issues.
If your company has a small or inexperienced credit control team that could be better utilised in other areas of your business, factoring could also be an ideal solution. By allowing a funding provider to collect your invoices on your behalf, you could significantly bring down your overheads by eliminating the need to pay staff to manage your credit control.
Companies experiencing rapid growth can often benefit significantly from Invoice Factoring services. In order to carry on growing and expanding, companies often need quick access to ready cash, but may sometimes struggle to balance the cost of meeting unexpected demand. Why not arrange a meeting with one of our advisors to find out if your business could benefit from invoice factoring?
One of the most common ways otherwise successful companies find themselves facing cash flow difficulties is paying their staff. This is particularly true of staffing agencies, who have to chase payments from clients while paying a large team of employees on time. Factoring lets you access to the value of your client invoices when you need it, allowing you to pay your employees on time.
Like factoring, invoice discounting allows you to use your invoices as collateral in return for ready cash. However, unlike factoring, invoice discounting gives you the option to handle your own credit control processes and keep our involvement confidential. This is generally a good option for companies which have developed strong relationships with their customers that they wish to maintain.
Companies that are experiencing rapid growth can often benefit significantly from Invoice Discounting services. In order to maintain growth and expansion, a company will often require access to ready cash. In fact, companies experiencing rapid growth sometimes struggle to balance the cost of meeting unexpected demand, which can harm the business in the long run.
