What an Invoice Finance Broker Does

An invoice finance broker offers a range of schemes to businesses which are suffering short-term cashflow problems. Whenever outgoing obligations temporarily outweigh incoming revenues, a number of different options are available to help smooth out a company’s cashflow. Whilst some of these are traditional methods with a long history, others are more recent. Invoice finance falls into this latter category, and tends to be split into two main types. Invoice factoring or invoice discounting may be suitable for you, but the difference is important to understand.

Invoice Factoring And Invoice Discounting

Both types of funding offered by invoice finance brokers take the form of an immediate, up-front cash payment. This is secured against the rights to a specific batch of invoices from your business, for work which has already been performed but for which you are still awaiting payment. As is only to be expected, the value of the invoices will outweigh the value of the up-front payment, thus rewarding the finance broker for taking the risk of providing you with immediate cash.

In factoring, the company receiving the immediate payment gives over almost all rights to the invoices concerned. The invoice finance broker handles the collection of the money, including all contact with the customer and continued chasing of payments. In contrast, the recipient company retains responsibility for collection of payments when invoice discounting is involved. Whilst it is still under an obligation to pay the money straight to the finance broker, it conducts all of the credit control functions for the transaction as usual.

Choosing Between The Two Options

Most invoice finance brokers will offer both types of scheme, although some may place a minimum turnover limit on invoice discounting offers. If your company is in a position to choose between the two options, it would be wise to consider their respective advantages and disadvantages carefully.

Factoring tends to be more suitable for small companies, as it removes the hassle of having to collect invoices for someone else and places the responsibility for credit control upon the broker. Such agencies will have expert finance departments, which are well used to chasing up customers and ensuring that payment is made on time. This can be a massive advantage for a small company which may not even have a full time financial professional on the books, let alone an entire invoicing department. However, there is no doubt that this advantage is counterbalanced by the issue of customers being followed up by staff whom you do not employ, and over whose behaviour and approach you have limited control. It is for this reason that larger companies, which are able to afford the expense of in-house credit control, tend to choose invoice discounting as the better option for them. It is particularly important for companies which rely heavily on repeat business not to risk confusing or offending valuable customers. Whichever method you choose, however, there is no doubt that invoice finance can be a powerful tool in helping to fix cashflow issues.

We can offer you financial solutions to help keep your cashflow healthy. Request a quote now to find out how much invoice finance can save you.

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