For many businesses invoices discounting provides the cash that is needed to ensure that their business can survive. Without the necessary cash they cannot pay employees or suppliers. Customer payment patterns can be erratic and can cause cash flow issues and headaches.
Invoice discounting is typically the cheaper of the invoice finance facilities available to businesses. It can also be confidential meaning your customers are unaware of any lenders involvement.
In terms of qualifying for invoice discounting it really rests on processes rather than financial performance. Don’t get me wrong financial performance is important but without the right processes in place you will not qualify for invoice discounting no matter how profitable you may be.
There are 2 main process that will be looked at. Your invoicing process will be interogated. It is important that a good audit trail exists and that invoices are raised in arrears of delivery.
Your credit control process or procedure is also important to demonstrate that debts are collected methodically and professionally rather than not at all or on an ad hoc basis when you have time.
If your invoicing process is not right it is unlikely any type of invoice finance facility will be made available. If your credit control procedures are not adequate it is likely a factoring facility would be offered rather than an invoice discounting facility.
