Invoice factoring and invoice discounting work in a similar way. With both processes, your business sells raised invoices to a provider and gets a high percentage of the invoice instantly paid in return. But there is one key difference. With invoice factoring, the provider operates credit control and deals directly with debtors on your behalf. This means that they issue statements, chase debts and take care of the sales ledger. But with invoice discounting, the business remains in control of collecting its own invoices and maintaining financial relationships with customers. This type of contract can be the perfect solution for larger and well established businesses with the resources to manage these financial processes and where customer fidelity is a priority.
An additional question: Respond to this Question
- How can factoring help my business improve cash flow?
- What are the requirements for factoring?
- Can I pick and choose which invoices are factored?
- How does a factor determine which invoices to accept?
- What does a typical factoring contract contain?
- How much cash will I get up front for my invoices?
- What is reverse factoring?
- What are the different types of factoring?