Survival in business is often determined by one simple factor: the careful management of cash flow. Maintaining a healthy cash flow is a challenge faced by businesses in every industry, irrespective of their years in business or annual turnover. One of the factors that determine whether you can maintain momentum is cash flow.
Invoice Finance is attractive as it is a flexible funding solution for businesses of almost any size and industry, from loss-making to significantly profitable ones. Your business could be eligible for the facility if you invoice and endure long payment cycles with customers, issuing invoices with payment terms of 30-90 days.
Invoice finance is devised in two forms: factoring and invoice discounting. Both facilities are similar in that they release the working capital needed to grow your business.
For a business to take advantage of the confidential benefits of invoice finance, it is imperative to understand the differences between factoring and invoice discounting before choosing which method is compatible with your business.
What is a confidential procedure?
Invoice Discounting is a confidential procedure whereby you retain control of your own sales ledger procedures, whilst still receiving the funding from your finance provider. Invoice discounting can be the right solution for larger businesses with vigorous in-house credit control procedures, or which want to operate the facility without their customers aware of the lender’s involvement.
Confidential facilities are usually only available for larger businesses, however, there are providers that offer this type of confidential arrangement to well-managed, small-medium sized businesses with an often lower level of funding requirement.
At Populous World, we pride ourselves in aiming to make your customer as less aware as possible of our involvement with your business. As this is a confidential process, the responsibility for sending monthly statements rests with your business.
How Invoice Discounting works:
• You invoice your customers as normal and send a copy of the invoice to your invoice finance provider • The invoice finance provider advances up to 95 per cent of the invoice value, usually within 24-48 hours. • You retain full responsibility over the administration of your sales ledger and debtor collection. • You receive the remaining balance of the invoice value, less any charges.
How Invoice Factoring works:
With invoice factoring, the provider takes control of managing the sales ledger, credit checks, control and also following up customers to settle outstanding payments.
• You invoice your customers and send a copy of the invoice to the factoring provider. • The factoring provider pays you up to 95 per cent of the invoice value, usually within 24-48 hours. • The factoring provider chases your customers, takes responsibility for credit control and collects full payment from your customers. • You receive the remaining balance of the invoice value, less any charges.
At Populous World, we offer an invoice discounting facility where we take a step back and allow your business to retain and maintain control of your own sales ledger and recollect payment in the usual way your business would. Our invoice factoring facility involves us managing your outstanding receivables with your customer to recover the debt of the invoice, so your customers will most definitely be aware of your factoring arrangement.
For more information on how to release quick working capital against your invoices, contact [email protected]