How does invoice discounting work?
Invoice discounting works in a way which offers the business the cashflow benefits of assigning their debts to the bank or financier but who do not require the associated administrative services which go with the product. For example, in full factoring, the existence of the facility between the business and the bank is known or disclosed to the end customer and the bank itself will carry out all of the credit control function i.e. chasing of outstanding debts and running the sales ledger. Notice of assignment in factoring is given at the outset of the trading under the agreement and also on each and every invoice.
However, invoice discounting is entirely confidential and the end customer is entirely unaware of the existence of the facility. Sometimes, a business using invoice discounting simply does not want end customers to know that they are entering into any form of finance facility. It might be that the business has a more than adequate internal credit control system and simply wants assistance in terms of cashflow rather than any of the other administrative services provided by factoring.
Invoice discounting is very popular and is by far and away the most predominant form of invoice finance in the United Kingdom. There are many different companies providing invoice discounting and it remains a popular and growing form of finance in the United Kingdom.
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Francis Wilks & Jones is the leading law firm in the country dealing with invoice finance related matters. Our team has combined experience of many years acting in invoice financing related matters. Whatever your invoice finance related question please contact us now and we can help you.