Invoice Finance Guide
Invoice Finance |
Invoice finance is a service available to businesses of all sizes whether you’re a small business turning over £250k or a multi-national organisation turning over £250m.
Invoice finance is a service designed to release cash from invoices as soon as they are issued. This allows you to put the cash where it is needed most as soon as the invoice is issued as oppose to waiting for payment.
Invoice finance allows you to release up to 85% of the value of the invoice typically within 24 hours of the invoice being issued, allowing you to put the cash where it is needed most.
Invoice finance is a broad service with many services sitting underneath it, such as invoice discounting, factoring, debt factoring, invoice factoring and recourse factoring. There are two main forms of invoice finance, factoring and invoice discounting.
Both invoice discounting and factoring are concerned with releasing cash from qualifying invoices. The key difference between the two forms of invoice finance is the management of your sales ledger.
Sales ledger management is the process of management of the issue and payment of invoices relating to work performed or goods delivered. Such things as credit policy may also be classed as part of sales ledger management.
Using a factoring service will allow you to offload the burden of running your sales ledger, so effectively your factoring provider will take control of your sales ledger management. That said it does not mean that your business will lose sight of what is happening to your sales ledger, you will still have full visibility of who has paid what and what invoices are outstanding etc.
Invoice discounting is different from factoring in the respect that you will retain control of your sales ledger and continue to issue invoices, track payment and chase outstanding payments.
Invoice Finance Summary:
In short there is one major difference between the two services factoring and invoice discounting. The difference is the management of your sales ledger, with an invoice discounting service you retain full operational control of your sales ledger, with factoring you relieve the burden to your invoice finance provider and they carry out all the painstaking process’s of chasing payment etc.
