Factoring & Sales Ledger Management

Sales ledger factoring or invoice discounting are generic terms covering a range of factoring and finance services designed to enable businesses to fund growth and expansion by releasing the majority of the capital that is tied up in their sales ledger.  Factoring, export factoring, invoice discounting and trade finance are all services that can inject much needed cash into a business.

Invoice Factoring

The factoring company normally pays you 75 – 80% of the value of outstanding invoices thus providing an immediate introduction of cash into the business. You send a copy of the customer invoices as they are raised to the factoring company who draw down between 75 – 80% of the value normally within one working day. The balance of the funds, less fees, are released by the factoring company when the customer pays. Factoring services also include professional follow-up, particularly chasing of payments to reduce late payments and thus workload in your business. You should think about invoice factoring as a financial solution for working capital for an expanding business with an annual turnover in excess of £50,000. Since the factoring company releases the cash tied up in your sales ledger, the business has the financial flexibility and time to realise plans for growth.

Invoice Discounting

While factoring is normally suitable for businesses with an annual turnover greater than £50,000, invoice discounting is a one-off service normally only offered to businesses with a turnover exceeding £1 million. Again there is an input of cash into the business within 24 hours of 75 – 80% of the value of outstanding invoices with the balance, minus fees, being released once customer payment is received. Normally the company, rather than the finance provider, will be responsible for chasing customer payment.