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Stories Tagged ‘Invoice Discounting’

Invoice finance can indeed increase profits. However, it is important to remember that it depends on what you do with the cash that the facility generates. It definitely increases your costs as you will have the invoice finance fees to pay so you will need to generate enough ‘new profit’ to cover these additional costs.

These new profits can be generated from new sales that took place because you were able to purchase more stock, fulfill more orders or perhaps pay more staff which will generate additional sales.

I have also dealt with clients who are able to take advantage of substantial settlement discounts. Any saving available that is more than the invoice finance costs leads to increased profitability.

In short yes invoice finance can lead to increased profits. However, that will depend on your own entrepreneurial abilities.

Selective factoring allows you to choose which invoices you factor. This means that you can turn selective factoring on an off as required.

If you have a sporadic requirement for working capital selective factoring can be a cost effective solution for your business.

How does selective factoring work?

  • Selective factoring allows you to notify a single invoice or a batch of invoices to be financed.
  • The selective factoring company will conduct some due diligence.
  • Once they are happy to deal with you you sell them the invoices.
  • The selective factoring company will check that your customers are happy with the products or services you have delivered.
  • They will advise your customers that the invoices have been purchased.
  • You are provided funding by the selective factoring company.
  • On the due date the customer pays the selective factoring company.

If you require selective factoring please contact Smart Factoring Quotes.

How long does it take to put in place an invoice finance, invoice factoring or invoice discounting facility?

Well the flippant answer is ‘how long is a piece of string?’ However, that helps nobody. On average I would say it takes 3 weeks but I have seen it done in 2 days. While the broker and factoring company plays a very big part in the process it does rely heavily on the requirement and the information that the prospect can provide.

I remember looking at an ‘urgent requirement’ last May and advising we could have a facility in place for the ‘following friday’. While we had everything in place the prospect simply let everyone down by not being able to supply simple information – such as a copy of his passport. This rumbled on until October!!

The flip side of this is a prospect that phoned me on a Saturday evening advising he needed a £1.7m facility in place by the Wednesday. I advised him everything I would need and I had it on Sunday morning. The facility was in place to meet his deadline.

The other key things to achieving a quick turnaround is a) knowing which invoice finance company can meet your needs and b) knowing which person within that company to speak to.

An Invoice Finance Quote is available from many places but at Smart Factoring Quotes we provide bespoke indicative terms for both invoice discounting and invoice factoring.

The invoice finance quote is based upon turnover, the number of debtors you have, the number of invoices you issue and our in depth knowledge of the invoice finance market.

Pricing is obviously an important aspect of any facility but it is imperative you look beyond headline rates. Take a look at our article about calculating factoring fees and also the article about comparing factoring quotes.

If you are looking for the best invoice discounting rates it is well worth speaking to Smart Factoring Quotes. We monitor the market for the cheapest invoice discounting rates available at any one time.

At present we have several invoice discounting companies who are actively competing on price and claiming they will not be beaten on price. It is however imperative that any business owner looks beyond the headline rates and considers total costs when comparing facilities from an invoice discounting company. It is also important to remember that the lenders offering the best rates can be among the most risk averse and as such your facility may be structured in a more cautious way.

At Smart Factoring Quotes our approach is to explain the benefits and potential downside of any facility and along side this show the total annual costs involved. This will allow any business owner to consider which facility represents the best value. To me that is the most important factor – compare the benefits the facility offers against the costs and then establish which facility represents the best value to your business.

If you want a helping hand give us a shout!!

Recruitment companies often use invoice discounting however very few have optimised their facilities in the market place.

Invoice discounting is an ideal solution for temporary recruitment companies that are on monthly payment terms but have to pay wages weekly. The invoice discounting facility can be confidential which means customers are unaware and in comparison to factoring the facility is typically cheaper.

In terms of a recruitment company optimising an invoice discounting facility for both costs and cash generation they should consider the following:

  • use the invoice finance market to your advantage and look to see which lenders are hungry for new clients.
  • look beyond the headline rates and consider total costs over a 12 month period.
  • remember you are part of a preferred sector so don’t be shy to negotiate strongly to reduce rates.
  • when looking at cash generation ensure that limits are available at least for your top debtors.
  • look at how a concentration limit could limit your funding – this is very important if you have a customer that makes up a large part of your turnover.
  • consider raising finance against your perms – some lenders will offer a 70% prepayment against perms.

Invoice Factoring – Maximise Prepayment

We have discussed several times on this blog that headline rates from invoice factoring companies can be misleading. If we put pricing to one side we can look at how you can maximise the amount of cash that your facility will generate.

Debtor Limits – some lender will assess each individual limit while others will only check debtors over 10% of the ledger. It is important you can get funding against your debtors. If you can’t the prepayment level is a red herring.

Minimise Dilution – the higher the number of credit notes you issue the lower the prepayment a lender will offer you. It is therefore important to concentrate on the quality of administration, pick & packing, etc.. to ensure credit notes are kept to a minimum.

Additional Security – lenders may look to increase your prepayment level if you can offer additional security. This could take the form of a personal guarantee, a charge on some unencumbered machinery or a charge against a property. It is really a show of confidence from you as a business owner and offers the lender additional comfort.

Change in Facility – if you have an invoice discounting facility you may get a better prepayment level if you move to a disclosed facility such as invoice factoring. It gives the lender more comfort and as such they may be willing to increase their exposure by increasing prepayment levels.

The site is still under development but it will compliment our existing site Smart Factoring Quotes.

The site is aimed at providing business owners with a free online resource that will ultimately help them select both the most suitable invoice finance product for their business and the most suitable invoice finance provider.

It is important to consider that whether you select a factoring of invoice discounting product the way it operates and performs will differ from lender to lender. This is based on the simple mechanics of how lenders operate but also on less obvious things such as a lenders reputation for communication. Some lenders will simply not return calls which can prove very frustrating while others have excellent reputations for customer service levels.

With our knowledge of the market we can help you navigate your way to the lender best placed to meet your needs.