Invoice Finance Explained
If you are owner of a large business that is capable of affording information systems and staff efficiently to collect and manage outstanding invoices then you might like to consider the invoice discounting program over factoring services. It is very similar to factoring except the fact that the collection responsibility and ledger management continues to be with you. The facility remains undisclosed to your customers.
It involves following two types of charges:
1. Administration Charges: It is either a percentage of the recorded turnover or a flat charge.
2. Interest Charges: These are the cash pay advances.
The Golden Rule
In case the annual turnover of your business is over £1million and you maintain an owned accounting system, invoice discounting can be a better option to consider over factoring. As each business is different with different circumstances, you may still find factoring to be a better option.
Almost every invoice factor offers services of invoice discounting, but some smaller factors can limit what they can underwrite.