Invoice Discounting
Many business owners struggle with cashflow as they try and bridge the gap between raising invoices and receiving payment. As you wait for payment from customers overheads such as staff, business premises and general operating costs still have to be paid. Eating away at your working capital and stumping the growth of your business.
In the UK over 50% of all invoices are currently overdue, and if anything, the problem is getting worse with the average number of days to receive payment now standing at 61 days, a 4 day increase on 2003.
Invoice discounting is a service designed to help your business grow as it allows you to turn your unpaid invoices into cash.
Using an invoice discounting facility you can release up to 90% of the value of your invoices, with the advanced cash in your account the next day.
As you issue invoices on a monthly basis; each month you decide how much cash you want to draw down from the lender, making it a truly flexible for of funding. The funds available to you also grow with your turnover so the more invoices you issue the more cash the lender will advance you.
Invoice discounting can also operate as a confidential service with your customers never needing to know you have a facility in place.
Invoice Discounting in action
Here is a quick guide explaining how invoice discounting works in practice.
- Step 1: An invoice discounting company will work with you to learn about your business processes, finances and customers.
- Step 2: The lender will then agree to pay you a percentage of your outstanding sales ledger, this can vary between 80% - 95%.
- Step 3: Your credit controller chases payment from your customers.
- Step 4: You pay the discounter an agreed monthly fee, as well as interest on the net amount advanced.
How much cash could you release from your unpaid invoices? Get a quote online now >>
Is Invoice Discounting right for your business? It could be if your business:
- Has a projected annual turnover of over £50,000
- Provides goods and/or services to other organizations; and
- Issues customers with credit terms of between 30 and 90 days.
If your business ticks the above three boxes then your business is ideal to use an invoice discounting service.
Learn more about who’s suitable for invoice discounting, or get a quote instantly online >>
How much does invoice discounting cost?
The costs associated with an invoice discounting facility varies depending on factors such as your industry, turnover and the outstanding balance on your sales ledger.
There are two main costs associated with an invoice discounting facility:
- Service fee
Lenders typically charge you between 0.01% and 1% of your annual turnover to administer your account. - Finance fee
The finance fee is usually a fixed percentage of the funds you draw down. This can vary from 1.5% to 2.5% over the Bank of England base rate.
The best way to get an idea of the cost of using invoice discounting is to get a no-obligation quote using our quick and easy to use quote form. Based on a few key pieces of information we’ll be able to provide you with a tailored quote instantly online.
How much cash could you release from your unpaid invoices? Get a quote online now >>
How does Invoice Discounting differ from Factoring?
Invoice discounting and factoring are both forms of invoice finance. The underlying principles are the same – to help organisations grow by turning unpaid invoices into cash.
The key difference between the two products lies in who manages your sales ledger, you or the lender.
Under an invoice discounting facility you will retain control of your sales ledger, credit control and collect payment from your customers.
Under a factoring facility the lender will manage these functions for you. Making factoring ideal for smaller organisations who may lack the necessary time, resource and management systems to do this effectively.
How much cash could you release from your unpaid invoices? Get a quote online now >>
