You may have heard about discounting and factoring. Perhaps you saw an ad for an invoice finance company and wanted to know what it could do for your business. No matter what questions you have, we will endeavour to answer them for you. There are about ten different benefits you can find with factoring or discounting. We will examine a few of them here in the hopes that they answer your questions.
The main focus of invoice discounting is to improve your cash flow. The entire point is to make certain you have money coming in even when your clients are a little late on payments. You may have 90 day terms with some of your clients, but find it is not working out because you need the funds within 30 days. To obtain the funds all you have to do is use discounting or factoring. A finance company offering these products often supplies at least 85% of the funds on outstanding invoices. You may not get all of the funds because the 15% is used as a fee for the process, but at least you have the funds you require.
There is a difference between invoice factoring and the discounting we have talked about so far. Factoring is going to offer you a way to sell your actual invoices to the company. With discounting you keep the invoices and use them as collateral. It is more like a loan with a few differences.
Invoice discounting will still make certain you have an ongoing amount of cash coming in. This will help your sales growth, as well as the overall growth of your company.
In terms of invoice factoring you will find the invoice finance company will handle the statements and send them out. They will also call your customers, collect payments, and help you maintain professional accounts. This frees up your time to go about other things such as concentrating on growth of business or paying your own expenses.
Financing allows you to plan on your incoming funds. You will know exactly what you are getting paid with invoice financing. This helps take away the guess work of what you can afford that month. Customers tend to respect factors or at least do not want to get them involved, which means they start paying on time or even quicker to ensure a smooth relationship.