Invoice Discounting

Invoice Discounting 

Many people find the use of the phrases factoring and invoice discounting confusing. 

They are frequently used and interchanged when talking about raising cash against invoices, but there are differences between the two. 

We go into more detail in our FAQ section, but basically factoring invoices means that the factor will control the collection of cash on behalf of their clients. 

The factor will generally have sight of all the invoices they factor, and have an open account for each individual customer which the client has at any one time. 

This means they are more “ hands on “ and this tends to be relatively more expensive as the factor has to do more work to run the account and collect the cash. 

Invoice discounting tends to be offered to businesses which have a good credit control department themselves and can effectively chase their own debt . 

The debt can still only be discharged by paying the factor, but this system gives the responsibility of maintaining credit control with the client. 

This system of payments is regulated by the factor who carry out regular audits of the clients ledger to ensure that the credit control is handled efficiently. 

Some factors will operate a “half way house “ system called CHOCs whereby the client factors the invoices, but still handles its own collections, which is what CHOCs stands for.  

Confidential Invoice Discounting. 

Some factors will offer invoice discounting on a confidential basis, whereby the factors involvement is not disclosed to the client’s customers. 

In this instance, the factor will verify the debt initially without disclosing their involvement to the client’s customers, and the invoices will be paid into a trust account. 

It is important therefore that you choose the right type of facility from the outset and the Factoring Advisory Service can help guide you through the process with trusted funders nationwide.

For free impartial advice

call our Invoice Discounting team on 0161 831 0247