Case Study

Boost your business confidence: Looking at Confidential Invoice Discounting

Invoice Finance can provide a financial lifeline for many businesses - but there are actually several different types of Invoice Finance available, and finding the right type is essential for you to find the solution for your needs. One of the fears that prevent some businesses from taking full advantage of Invoice Finance for their business is a concern about any potential impact on their relationship with customers - but a solution exists.

All types of Invoice Finance can provide an answer to cash flow issues caused by slow-paying customers. So, instead of waiting for 30, 60 or even 120 days to get the money your business is owed, you could receive up to 80% of the value of those invoices straightaway.

It provides important financial support, but some businesses still remain wary. While they appreciate that Invoice Finance could drastically improve their business cash flow, some businesses may be worried that customers will see the fact that the business is using the facility as a sign of financial weakness.

Luckily, this is a becoming an outdated attitude, and many of the most successful companies across the UK use some form of Invoice Finance to deal with slow-paying customers. However, in more conservative sectors, some resistance to Invoice Finance may remain.

Finding the right type of Invoice Finance

With certain kinds of Invoice Finance, it may not be possible to avoid revealing that you are working with such a provider. Invoice Factoring is one of the simplest forms of Invoice Finance and will usually be revealed to your customers as the lender will take over credit control on your behalf. Their credit control team will contact your customers to ensure payments are made to schedule. This has the advantage of removing the need to chase up customer payments yourself, but may well complicate relationships with your customers.

Invoice Discounting, which is an alternative to Factoring, still offers prepayments against your invoices but can allow you to retain your own credit control activity. With this particular solution, the provider will take over a company’s entire sales ledger. They will advance the cash, usually around 80%-85% of the value of each invoice, immediately as it is issued with the remainder, less their fees, once the customer settles the outstanding debt.  

With Disclosed Invoice Discounting (DID) the arrangement is not confidential from customers. Customers will be advised of the discounter's involvement with a notice of assignment added to every new invoice.

However, Confidential Invoice Discounting can provide a solution which is not revealed to your customers. It can give your business all the benefits of immediate payment as soon as goods or services are provided, without revealing those arrangements to the customers involved.

Confidential Invoice Discounting is simply Invoice Financing that can be arranged confidentially; customers and suppliers remain unaware that the business will be advanced cash against sales invoices before payment is received.

With a confidential arrangement, the supplier can either call customers in your name when chasing payments or allow you to retain responsibility for your sales ledger, credit control and collection of outstanding invoices. A Confidential Invoice Discounting facility could, therefore, be most appropriate for businesses that have the resources to retain credit control, as they will remain in charge of their own sales ledger, and may be able to offer different terms to different types of customer.

The financial arrangements will not be revealed to your customers. However, as part of the lender’s security control measures, they may make calls aimed at identifying any invoices that are not valid and payable. Telephone debt verifications are a standard industry procedure and will mean an auditor may speak to a random sample of customers from time to time. They will still call in your name and maintain confidentiality.

How the service is provided

When large numbers of invoices are issued, and the volume of business remains fairly constant, the discounter can provide a regular sum, based on the estimated total monthly value of the debts. This is called bulk processing and requires a monthly reconciliation process. These days, a more common process is sales ledger upload, where software is integrated with your accounting package, enabling you to share your entire sale ledger with the discounter automatically and minimising your workload.

Do you need Confidential Invoice Finance?

Invoice Discounting could be suitable for your business if you’re running a B2B company that invoices in arrears and has a turnover of £250,000 a year or more.

Most providers will not assess the creditworthiness of your individual customers, but protect themselves against any potential insolvency by relying on your business having a wide spread of customers.

At Rangewell, we work closely with all our clients to understand their circumstances before we suggest a particular type of finance. If you want to find out what Factoring, or any other type of Invoice Finance, could do for you simply talk to our experts. Our service - and their expertise - is absolutely free.

If your small business works with large businesses, late payments could cause you problems. Call us to discuss what type of Invoice Finance could provide the answers you need, and how we can help you find the provider that is right for your business.

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