If you are in need of a cash boost but want to remain in full control of your customer relationships, then invoice discounting could be just what you are looking for!
Invoice discounting is fast becoming a favourite type of invoice financing within the UK and it’s easy to see why, it’s fast, flexible and completely confidential – your customers will have no idea you’re using a financing facility.
You can give your business the cash boost it needs fast and discreetly without interrupting your customer relationships.
What is invoice discounting?
Invoice discounting is a smart financial solution that lets you access the funds trapped in your unpaid invoices.
It’s a straightforward and swift process, favoured by businesses across various scales. You provide your outstanding invoices to the provider, who then advances you a portion of their value, typically within 24-48 hours. You stay in control of your collection processes.
Once the customer pays off the invoice, the provider releases the remaining balance to you, deducting any fees. It’s a seamless and trouble-free way to manage your cash flow while keeping your financial dealings confidential.
How does invoice discounting work?
Everyday business: You keep doing your day to day – providing great services or products to your customers, and invoice them as normal.
‘Sell’ your invoices: You decide how much of the money you are owed you want to release from your sales ledger. Your invoice discounting provider will process the invoice and verify it with the customer.
Get your money: In just 24-48 hours, you’ll receive up to 100% of the value of your unpaid invoices directly into your bank account.
Customer pays their invoice: The customer pays their invoice straight into a trust account in your name, this ensures total confidentiality.
Receive the balance: Once the payment is received, and previously agreed-upon fees and charges are taken by the provider, you’ll receive the remaining balance from your invoice straight into your bank account.
What are the advantages of invoice discounting?
There are many advantages of invoice discounting, here is a breakdown of what you may want to think about when considering this type of invoice finance.
What are the disadvantages of invoice discounting?
What are the types of invoice discounting?
Disclosed invoice discounting
In Disclosed Invoice Discounting, every invoice you send out has a note on it telling your customer to pay the invoice discounting provider directly. They’ll set up a trust account where all the payments from your customers go. You can’t take money out of this account, only put money in.
You’re in charge of making sure your customers pay, but you’ll need to check in with the invoice company once a month to make sure everything adds up. They might also check to make sure the money you’re owed is correct. If there’s a risk a customer won’t pay, you can add on extra protection from the provider.
Confidential invoice discounting
With confidential invoice discounting the invoices have no evidence that a finance facility is involved. You send out your invoices and collect the payments in total confidentiality.
Disclosed invoice discounting
In Disclosed Invoice Discounting, every invoice you send out has a note on it telling your customer to pay the invoice discounting provider directly. They’ll set up a trust account where all the payments from your customers go. You can’t take money out of this account, only put money in.
You’re in charge of making sure your customers pay, but you’ll need to check in with the invoice company once a month to make sure everything adds up. They might also check to make sure the money you’re owed is correct. If there’s a risk a customer won’t pay, you can add on extra protection from the provider.
Confidential invoice discounting
With confidential invoice discounting the invoices have no evidence that a finance facility is involved. You send out your invoices and collect the payments in total confidentiality.
How much does invoice discounting cost?
Fees are specific to each business and will vary on the provider, your annual turnover, and the workload involved. Always ensure that you discuss and understand the terms of your provider’s agreement before committing to using their services.
However, there are two main fees associated with invoice discounting:
Service Fee
This fee is charged for the provider’s services such as the sales ledger management. The fee is typically charged as a percentage of your company’s annual turnover.
Discount Fee
This fee is taken by the provider for issuing the cash advance and is calculated as interest on the amount borrowed.
Invoice discounting is suitable for companies with a net turnover of £250,000 or more. If your turnover is lower than this, you might want to
For a rough idea of rates, try our interactive invoice finance calculator. The calculator is based on up-to-date real life data from Touch’s customers. It will give you an indication of likely
Invoice Finance Calculator
Invoice Discounting Calculator
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Who is invoice discounting suitable for?
Invoice finance is used by over 40,000 UK companies and can be used for invoices of a few hundred pounds to multiple millions. It doesn’t matter whether you’re a small business or a large international corporation, as long as you are a business to business (B2B) company and have payment terms of 14 days plus, invoice discounting can be a helpful option. However, because of its confidentiality element, invoice discounting is a popular option for larger businesses.
Providers will have their own rules, but most will expect you to have a net turnover of over £500,000 and have been trading for at least 12 months, be able to prove financial viability for 6 months, demonstrate a capable credit management team alongside strong credit management and credit report tools. If you don’t meet these requirements, then you might want to consider invoice factoring or CHOCCS
Invoice discounting is used to support a wide variety of industries such as:
What is an invoice discounting broker?
An invoice discounting broker serves as a link between your business and suitable invoice discounting providers.
Touch Financial proudly holds the position of the UK’s top invoice finance broker. Choosing to partner with us means you gain quick access to expert guidance completely free of charge, helping to make the decision of choosing the right partner an informed one.
We have selected 25 of the UK’s top invoice discounting providers. Following a consultation with one of our experts you will be connected to up to three potential providers and guided through their costs.
Our services are completely without obligation we only want to give the best available advice on the products available to you.
There are several questions we will want to consider when selecting your best providers
- What’s the size of your company?
- What does your trading history look like?
- Where are you in the UK?
- Have you used invoice finance before?
- Who are your customers?
Our services are completely without obligation we only want to give the best available advice on the products available to you.
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