Invoice discounting and factoring are both well established types of invoice finance. Whichever one you choose, you will be unlocking cash from unpaid receivables which you have sold either to a bank that offers these services or a specialist invoice finance company.
Invoice discounting works in a similar way to invoice factoring, but allows your business to remain in control of debt collection and customer communication. Therefore, invoice discounting might be the most appropriate option for larger businesses with a well-established and well-resourced finance department and for whom customer relations, reputation and financial confidentiality are a priority. As all administration and debt collection is taken care of in-house, the return on each invoice is much greater.
An additional question: Respond to this Question
- Are there any risks or inconveniences to factoring?
- What criteria should I consider before choosing a factor?
- How do I assess the quality of factoring companies?
- Must I work with a factor in my location or can I work with one in another city?
- Who are the major UK factoring companies?
- Should I use factoring or a bank overdraft?