Invoice financing offers a range of great cash flow solutions for your business but choosing the right facility can be difficult. We compare invoice finance solutions and help you decide which option would be the most suitable for your company’s needs.
What are the invoice facilities, and what are the differences?
There are two main types of invoice finance, invoice factoring, and invoice discounting. Both of these facilities allow your business to sell your invoices and release up to 95% of the value. However, this is where most of the similarities end.
The essential difference between the two is a credit control service. Factoring includes the funding facility and credit control services which includes chasing late payments and settling customer invoices on your behalf. There is no additional credit control service with discounting.
Invoice Factoring vs Invoice Discounting
Let's compare the main differences between both facilities side by side.
| Discounting | Factoring | |
|---|---|---|
| Can I release up to 95% in 24 hours? | ||
| Are credit control services provided? The provider manages sales ledger and invoice collection on your behalf. |
||
| Is it confidential? Confidentiality means that customers will not know you are using a facility. |
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Invoice Factoring
Factoring is a funding facility with the added benefit of a credit control service. The provider manages your sales ledger, credit control, chasing and collecting outstanding invoice payments on your behalf. Customers will settle invoices directly with the provider. This makes your customers aware of the factoring facility you have in place.
Factoring can help free up your time but bear in mind, with the extra credit control services, it may be more expensive compared to a discounting facility. This is usually used by smaller businesses.
- Funding facility plus credit control
- Outsourcing credit control frees up your time
- Reduce your costs by not employing credit control staff
Invoice Discounting
Discounting is a funding facility only. It does not include a credit control service, meaning you remain in control of your sales ledger and chasing outstanding invoices. Your customers won’t know you are using a facility as you will be dealing with them direct (as usual) – making the service more confidential. This is usually used by larger, more established companies
- Funding facility only
- You deal with customers and credit control as usual
- It's confidential, so your customers won't know
Still unsure which solution is right for you? Don’t worry, we can help you compare and decide which option would be the most suitable for your business needs.
Apply today or call our friendly team today on 0800 433 7140 for more information or for your free no-obligation quote.
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