Invoice Discounting & Factoring

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Invoice factoring is where a third-party commercial finance company buys your outstanding invoices, which can add value to your business. 

In this circumstance, the factor inherits the responsibility for gaining payment from the customers, managing credit control for the business and processing the payment. They are client facing and will manage that on your behalf. 

Invoice discounting is used to support a company’s cash flow position, however, in contrast to invoice factoring, the business maintains the responsibility for the customer account, payment chasing and invoice processing. 

Both Factoring and invoice discounting require borrowing against your debt, but they are executed differently. With factoring, the finance company takes over the management of your sales ledger and credit control process while chasing customer payments on your behalf, meaning you don’t have to deal with the time and cost of credit checking your customers. 

With Invoice discounting you get to manage your own sales ledger and collect payments yourself, retaining control of the process, meaning your customers will be unaware of the invoice discounting agreement. Usually, a monthly reconciliation of the account that reflects any changes in the level of debt to be disallowed will be required. The finance provider can then adjust the funds which are available to you. 

Invoice discounting and factoring both provide a quick and efficient boost to your cash flow. Thanks to the differences between the two there are options in order to choose the right path for your business. Choosing an option which best suits your business depends on the nature of your organisation and its needs including your business’s size and ability to effectively manage your sales ledgers are also key considerations.

At BH Financial Services, we get to know your situation in detail in order to provide a bespoke and impartial solution to deliver the best results for your business.