Advantages & Disadvantages of Invoice Discounting

What could invoice discounting do for your business?

The Benefits of Invoice Discounting

  1. Get paid faster.  No more delayed customer payments holding you back. Whether it’s investing in marketing, purchasing assets or hiring staff to meet demand, faster payments mean you can focus on your future today.
  2. Maintain your own customer relationships.  Unlike invoice factoring, with invoice discounting you keep control of your sales ledger and credit control. This means you continue to manage your customer relationships and there is no transition period in terms of your collection process or customer service.  Invoice discounting is confidential so there is no need for your customers to know a third party is involved.
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  4. Increase profits.  Access to larger sums of cash enables you to make early, bulk purchases that often include volume discounts.
  5. No more missed opportunities.  With more readily available cash you can seize the moment when an opportunity comes knocking.
  6. Expert financial advice. Many providers will be able to provide you with specialist expertise when it comes to your finances in general. Some will perform credit checks on potential customers enabling you to avoid problems down the road.
  7. Revitalised cash flow.  The consistent flow of cash into your bank account prevents inconvenient bank charges and could mean a healthier rate of interest accruing.
  8. Reduced stress. Waiting for your customers to make their payments so you can settle your bills, pay staff or order supplies is a tense time to say the least. With a reliable influx of funds each month enabling you to meet your obligations, maintain your good credit rating and sleep a little sounder at night. If your provider offers a non-recourse option or ‘bad debt protection’ you will be protected from the risk of customers who fail to make their payments.
  9. No bank loans.  When compared to other types of finance such as bank loans or overdrafts invoice discounting is far more cost effective, more flexible and doesn’t factor as a liability on your books.  Your discounting contract can be set up in far less time than a bank loan application would take. Discounting companies, unlike many banks, won’t ask you to justify what you’re going to spend your money on and won’t prejudge your business if you’ve hit some hiccups along the road.

It is important to remember that in order to be considered for invoice discounting you will need to have established, in-house credit control processes and a proven track record of collecting payments.

If you would be better suited to an arrangement that includes the outsourcing of your sales ledger and credit control, an invoice factoring service may be the better choice for you.

We recommend getting multiple quotes from at least two different providers so you can compare key differences in their services and costs. If you’d like WhatCost to help we can provide no obligation quotes on request from the UK’s leading providers. Complete the form below and we’ll call you to discuss your requirements.

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