Invoice Discounting can seem to be a mysterious and complicated process. It does not have to be. Here are a few simple tips and points to give you a better understanding and to help you get started:
- What is Invoice Discounting?
Invoice Discounting is the practice of using a company’s funds which are tied up in an unpaid invoice’s (Accounts Receivable) as collateral for a loan as a short term funding option.
- How can Invoice Discounting benefit a business?
By providing the immediate release of funds tied up in an unpaid invoice which can be used to pay employees at the end of the month, pay suppliers on time, pay suppliers earlier and avail of additional discount or to fund future business growth and expansion
- What is the difference between Invoice Discounting and Factoring?
The essential difference between Invoice Discounting and Factoring lies in who takes control of the sales ledger and responsibility for collecting payment:
- With Invoice Discounting, your business retains control of its own sales ledger and chases payment in the normal manner.
- With Factoring, the provider takes the role of managing the sales ledger, credit control and chasing customers for settlement of their invoices.
- How confidential is Invoice Discounting?
With Invoice Discounting, your customers still pay you directly; there is no need for them to know that a funding third party is involved. Unlike Factoring, the customer settles their invoice directly with the Factoring company; so their customers are more likely to be aware of your Factoring arrangement.
- What type of business use Invoice Discounting?
There are no restrictions to the type of business or sector who can use Invoice Discounting as a service. They can be:
- Start-ups: helping them to get their business off the ground
- Growing businesses: enabling them to utilise their cash flow more effectively
- Struggling businesses: allowing them to pay suppliers earlier and availing of added discounts.
Here is a video link explaining how Invoice Discounting works – simply click here.
Celtic ID will advise you on whether Invoice Discounting will be right for your business or not. We will speak to you in plain English and give you all the facts you need to make a decision. Why not call us on 01 230 0866 for a confidential conversation.