The truth is that the business world is full of services aimed at providing them with financial support. Most of these services are created to provide businesses with the financial leverage they need.
One type of finance solution available is known as invoice discounting. This kind of solution offers many benefits for both the large corporation and the small business person.
Please Explain Invoice Discounting
Invoice discounting offers a financial solution for businesses who sell their products and services to other firms on credits. If you are struggling with your finances lately, then this may be an answer you want to consider.
Debtor balances within numerous businesses are the largest asset to be found on their balance sheet. However, these ‘assets’ tend to bring in money much slower than the firm needs. It could take as long as two or three months to see the cash come in from the time the invoice is sent to the time you are paid.
This can cause your business to run low on cash. When the company is struggling financially, it can slow down productivity a great deal. Invoice discounting can offset this trend.
Discounting provides as much as 90{ed162fdde9fdc472551df9f31f04601345edf7e4eff6ea93114402690d8fa616} of the total invoice within 24 hours of it being raised. This ensures that you have the money you need to keep your business running, expand like you’ve been planning to do, and keep everything on track. No longer do you have to wait two or three months to see the profits from these invoices.
Invoice Discounting Can Solve
There are various issues that invoice discounting can efficiently solve. First of all, it can help with the everyday slow-paying customers. Because this service pays you within twenty-four hours, your business is safe from the slow-paying client.
You have the cash you need as soon as you raise the invoice. The customer can then pay without you becoming frustrated or impatient because you have already received the money you need.
It can also help ensure that you are watching out for the incredibly valuable customers. You will be able to give the customers that have been with you a long time an extended amount of credit. This means that they will be more likely to buy from you in the future and ensure that you and your valued customers can further strengthen the existing relationship.
Because you will have the cash nearly instantly, you can ensure that you are paying the suppliers when payments are due. No longer will you have to worry about making late payments because someone hasn’t paid you yet.
Sometimes, you can even find yourself acquiring better deals and enjoying better discounts in exchange for quickly paying your suppliers.
The Benefits
Invoice discounting ensures that you remain in charge of the sales ledger. However, it also provides you with the flexible funding needed and it grows with the needs of your business. There are numerous benefits involved with this service.
First of all, it provides assurance that you will have immediate working capital that grows with you. This means that the more sales invoices you create, the more working capital available to your business. The amount of finance available grows as your business grows.
Second, you will enjoy a bit of freedom with this service. You will have the freedom of being able to spend money when you need it rather than waiting for the invoice to be paid.
Other benefits include being able to strengthen relationships, maintain control over the management of your ledger and collection, increased flexibility, and all in all, you get paid nearly immediately.
Your customers will be able to enjoy the benefits of extended credit and more patience from you. Your relationships will be strengthened, and you will be more patient waiting for payments because you can pay the bills you need to pay.
All-in-all, invoice discounting benefits everyone involved.
References
http://www.factoringhelpline.co.uk/invoice_discounting/benefits_of_using_invoice_discounting.php
http://www.accountingtools.com/questions-and-answers/what-is-invoice-discounting.html
http://www.businessdictionary.com/definition/invoice-discounting.html
