What is invoice discounting?

Invoice discounting is a type of company financing that uses customer invoices to obtain some type of cash flow before customers actually pay these invoices. As with the invoice factoring process, the invoice invoice discounting is a short -term situation that allows the company to draw funds against these invoices, and then repay the balance when payments are accepted on these invoices. Unlike most debt factoring arrangements, discounting invoices does not necessarily include the conclusion of a long -term liability with the creditor, which makes this option ideal when the company needs assistance with cash flows for a relatively short period of time.

with a factoring invoice, the company identifies specific invoices that are presented to the creditors. The creditor can assess these invoices, often in terms of the payment history of the company's client and the overall nominal value of this invoice. If approved, the creditor will allow the company to draw the percentage of this nominal value, oBSEKLY NOT more than 80%. The Company gives an invoice to the customer who, in turn, pays the invoice according to the conditions. Once the payment is received, the company repays the creditor the total amount drawn plus interest and the monthly fee associated with the advance.

One of the main advantages of the discount approach to the invoice is that the company can select specific invoices that can be submitted to the creditor rather than to submit a whole dose of invoices generated for the period. This approach facilitates the company to assess its needs of immediate cash flow, select an invoice issued to customers who permanently leave payment within 30 days or less, and use only those for advance. The company remains under the control of the invoicing process and, if necessary, even continues to manage efforts service.

Another advantage for a company that decides to go with invoice discounting is that customers don'tThey must change anything in the way they disappear. With a factoring arrangement, the creditor usually requires the establishment of a locked box and a change in remittance to make these customers' payments directly to the creditors. Factoring services also take over the collection process that can sometimes harm customer relationships and lead to a business loss. Given that the access to the invoice discounting usually does not introduce a third party to communication between the company and its customers, this method of accelerating cash flows is truly transparent and has a very little chance to influence relations with esteemed customers.