Confidential Invoice Discounting Explained
What is confidential invoice discounting?
Invoice discounting is a means of releasing the cash tied up in your unpaid sales invoices. Confidential invoice discounting is no different except that the process is completely confidential; your debtors have no idea that you are working with invoice discounting companies.
You are under no legal obligation to inform your customers that the amount they owe you has been assigned to an invoice discounting company, and your own staff still handle the process of raising invoices and chasing payments. So, from your customers’ perspective, it’s business as usual.
In this way, confidential invoice discounting not only offers an effective solution to cashflow problems caused by overdue payments, but can do so without alerting your customers to the fact that the problem ever existed.
Of course, not all companies that use confidential invoice discounting are in difficulty. This form of finance can make a higher level of funds available than a bank overdraft facility at comparable cost. For many companies, it’s an ideal way to release funds to grow the business.
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How does confidential invoice discounting work in practice?
With a confidential invoice discounting facility in place, you can receive up to 90% of the value of your unpaid invoices. For example, if your business is currently owed £250,000 by customers, you could immediately receive £225,000 to improve cashflow or fund growth and development.
In practice, the process works as follows:
- Once you have provided a service or product, your business raises an invoice to the customer, and sends a copy to the invoice discounter at the same time.
- The invoice discounting company advances you the agreed percentage (usually between 80-95%) of the value of your invoice.
- You manage credit control and chase payment just as you would normally do. The fact that your business is paying interest on the advanced funds is an incentive to get invoices settled in good time.
- Once the invoice has been settled, you put the payment into a trust bank account and inform the invoice discounter.
- The invoice discounter then withdraws the payment from the trust account and refunds you the balance, less the agreed service fee and interest.
As you can see, the customer remains unaware of the confidential invoice discounting service throughout this process.
Choosing the right confidential invoice discounting company
Is there really any difference between one confidential invoice discounting service and the next? Yes – and it’s not all just about price. There can be significant differences between the various invoice discounting products, and (to make things even more complicated), some providers are specialists in particular business areas. As a result, choosing an invoice discounting service isn’t always straightforward.
It can make all the difference to have expert support. With Touch Financial, you have years of experience and in-depth industry knowledge behind you.
We’ll work with you to get an accurate picture of your needs, then introduce you to the best invoice discounter for your business. We’re independent, so we can offer a completely impartial recommendation. And we often have access to trial offers that enable you to try an invoice discounting service before you commit to it.
With Touch Financial, you can be sure of choosing the right confidential invoice discounting service for your specific requirements. What’s more, our advice is entirely free of charge, and without any obligation on your part.
All excellent reasons to contact one of our expert consultants right now to discuss confidential invoice discounting in relation to your own business.
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Also in this section:
- Benefits of using an invoice discounting broker
- The advantages of using an independent factoring broker
- 7 ways invoice discounting could help grow your business
- Discounting invoices in action
- The difference between factoring and invoice discounting
