Discounting Invoices In Action

With Invoice Discounting, invoices are turned into cash within 24 hours

Invoice Discounting is a form of lending that solves one of the most common business cashflow problems – the gap between raising invoices and receiving payment. In using Invoice Discounting, invoices are translated into cash almost as soon as they are raised. The lender pays up to 90% of the invoice value into your account, usually within 24 hours.

With Invoice Discounting the‘time lag’ of invoices is a thing of the past – and with at least half of the invoices raised in the UK overdue at any one time, it is becoming an increasingly popular form of business  finance. It can provide the cashflow stability needed for businesses to meet their running costs and their targets for growth.

What’s more, the arrangement can be completely confidential, so your customers need never know that you use an Invoice Discounting service.

Invoice Discounting is usually quite competitive in price when compared to bank overdraft rates. You will pay a monthly service charge plus a fixed interest rate on the amount advanced to you by the Invoice Discounter.

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Step by step discounting invoice to payment

If you are interesting in setting up an Invoice Discounting agreement, the prospective lender will review your credit history and systems before agreeing to advance a percentage of your outstanding invoices. Once this agreement is in place, the process works as follows:

  • You provide a product or service to a customer.
  • You invoice the customer, and send a copy to the Invoice Discounter.
  • The Invoice Discounter advances you a percentage (typically 80-95%) of the value of the invoice, and this amount can usually be in your account within 24 hours, although you don’t have to draw down the full amount that’s available to you.
  • You chase your customers for payment in the usual way. When you collect payment, you deposit the money into a trust bank account and notify the Invoice Discounter.
  • The Discounter collects the money from the trust account then pays you the balance, less their charges.
  • Depending on whether the amount you invoice goes up or down each month, you will either be advanced more money by the Discounter, or repay money to the Discounter.

What are the benefits?

Using Invoice Discounting invoice payment times can be dramatically reduced; the service can be completely confidential; and you retain total control over your sales ledger. In addition, this form of finance can provide more finance and be more flexible than traditional forms of borrowing from the bank.

Could your business use Invoice Discounting?

More than 50,000 businesses in the UK are currently using Invoice Discounting or Factoring. To be considered suitable, a business needs to:

  • Provide goods or services to other businesses
  • Issue its customers with credit terms of 30-90 days; and
  • Have a projected annual turnover of £50,000 or more.

You can use Invoice Discounting whether you are in business as a sole trader, a partnership or a limited company.

Choosing the right Invoice Discounting provider

One Invoice Discounting company is not the same as the next. Some specialise in specific sectors of the industry, and each offers a slightly different product and service. And while these might seem like small differences in theory, in practice they could make a significant difference to your business.

At Touch Financial, we aim to match you with exactly the right Invoice Discounting provider for your needs. Whether yours is a start-up business, a growing business or a struggling business, we’ll take the time to fully understand your situation then introduce you to the best provider of Discounting Invoice services for your individual requirements.

It costs you nothing to use our services and you can count on us for completely impartial advice. We also have access to some exclusive rates, and in some cases we can even offer ‘try before you commit’ deals with selected providers.

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Every month Touch Financial help businesses improve their cash flow with invoice finance. Request a quote to find out how much extra cash you could raise.

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