web statswebsite tracking software Immediate Cash with Factoring & Invoice Discounting

Over 17 Years in Business

Recent Transactions

£100,000

To Small Van Courier providing deliveries in Ireland.

£250,000

To Small fashion importer and exporter

If you are a small business owner, or a financial influencer with a large company, you could be concerned with the cost of collecting outstanding accounts from customers. Various aspects need to be considered; for example, the number of personnel employed for collections. This is followed by their relative work competency, effectiveness and would it be a viable proposition to reduce the resources devoted to money collection!

Consideration could be given to factoring or invoice discounting, both of which could be described as methods of obtaining immediately available cash. It is achieved by the sale of accounts receivable to a factoring company or a finance company.

The specific needs and forward planning of your business will determine the most suitable method and solution. In some instances, factoring will prove viable as most accounts receivables could be transferred to that source. However, if a business already has a well designed and efficiently performing collections department, then the alternative of invoice discounting could be preferable.

The concept of factoring refers to the outright sale of receivables to a factoring company and is sometimes termed “asset securitisation”. Invoice discounting could also be referred to as the sale of receivables. In this option, administration processing of the receivables and collection remains under the control of your business or company. Customers are not usually aware that their receivables are subjected to invoice discounting. In the case of factoring, they are made aware of this procedure and also receive communications regarding specific enquiries related to invoices. This could influence your perception regarding customers' reactions, if you consider there is a sensitivity issue.

A primary consideration related to your decision of factoring or invoice discounting, is your cash needs! Adoption of either of the two methods does mean you are paying for an immediate cash flow injection, but retaining the collection process, would generate added cash. This is due to the contracted factoring company accepting greater responsibility and additional functions with factoring, in comparison to the alternative option. Another factor relates to the size of your portfolio of unsecured receivables and how diverse it is. Taken into consideration will be any single customers, holding in excess of 20% of the total balance of receivables.

Invoice Discounting Rates Starting at 1.59% to 3.5%

  • No monthly requirements.
  • No financials needed.
  • No setup fees

There is a general tendency for companies utilising invoice discounting to be on the larger side and possess a more diverse portfolio. With their collection personnel and methods in place, the costs involved in changing them could prove prohibitive for a factoring process. Whichever option is chosen, the providing company gives careful consideration to the diversity of a portfolio. The sale of the right to collect cash owed to you, by means of outstanding invoices, is perhaps the simplest description of factoring invoices.

Primarily, businesses partner a factoring company, when there is an immediate need for cash. Another instance is when customers are extending their payment times and there are insufficient resources to develop an effective accounts collections facility. On occasions, although some large companies are able to have accounts receivables financed by a bank, it could be an advantage to also have access to a factoring company.

The facility of invoice factoring is not regarded as a loan, but as an outright sale of a business asset to a factoring company. Viewing it from another perspective, it could be classified as a cash advance. As a business, you would forfeit a defined percentage of the money you could reasonably expect to receive in the future, from customers paying their outstanding accounts. Instead, you would receive immediate cash which would enable you, to take advantage of preferential buying opportunities at discounted prices. This in turn creates a greater profit margin and encourages development for the future.

Depending on the selected factoring company, the methods used in its operation will be determined. Some companies will make an outright purchase of invoices, while others will make an initial down payment, towards the total invoices amount. Payment of the balance, after deduction of their fee, is made when they receive payment from the customer. A particular advantage of invoice factoring is that your credit history and standing, has no relation as to whether you are approved for this service. Instead, it is the customer whose credit record is the determining factor regarding acceptance of the account.

Your decision regarding colloborating with a factoring company is influenced by your current informational needs. This relates to the effectiveness of collections efforts and the regularity and promptness of payments by your customers. Further influences concern the collection of this data and your reliance on it to make future credit decisions for this customer. Further, is the company able to provide a service in the format and frequency you want? If this system does not meet your criteria, then invoice discounting could be your preferred choice, with your current data collection techniques remaining undisturbed.

Invoice Discounting Rates Starting at 1.59% to 3.5%

  • No monthly requirements.
  • No financials needed.
  • No setup fees