FREQUENTLY ASKED QUESTIONS
INVOICE DISCOUNTING EXPLAINED
Invoice discounting is the process whereby a business can secure funding against some or all its invoices at a discounted rate to increase the working capital of the business. It is a very flexible solution in the sense that the business can decide which debtors and which invoices it wants to discount. The business can realise cash, up to 80% of the invoice value, through this process.
Invoice discounting is a far more flexible product compared to invoice factoring, by accessing a higher percentage of your debtors. Invoice discounting offers the opportunity to obtain funding linked to specific invoices and/or debtors, while with invoice factoring your whole debtors book will be implicated through the factoring process. Factoring also entails the business selling its invoices at a discounted rate to the “discounting house”, effectively moving ownership and collection responsibility to the “discounting house”.
You, as the client, continue to issue your invoices to your customers/debtors as usual. Once all goods or services have been rendered and all your documentation (including the relevant invoices) have been submitted to your client, these supporting documents is submitted to us for confirmation and validation only.
You certainly can. Based on your funding requirements for the business, you decide which debtors you feel comfortable with discounting their invoices.
No, you can decide which invoices you want to discount based on the cash flow requirements of your business.
No, not at all. No fixed or long-term contracts are required. You can make use of the invoice discounting service as and when you need it, even if it means that you discount one month and then only again after two or three months.
- Quick solution to cash flow problems;
- Allows more room for credit sales;
- Stay in control of your own customers;
- No long-term fixed contracts;
- Negotiate better terms and early settlement discounts with your suppliers and creditors;
Flexible product – you decide how much cash you need and which debtors to discount.
The management of your customer relations and payment of outstanding invoices remain within your control. Payment details from selected customers (debtors) are changed to a designated regulated account. Once funds are paid into this account by your client, transactions are reconciled and the capital portion plus applicable fees are disbursed to us. The balance to your normal operational account will then be payed within 24 hours.
We charge a discounting fee of between 0.1% – 0.15% per day depending on who your debtor is, payment history with the debtor and the amount that you want to discount per month.
We can assist any type of business, even if you have been trading for a short amount of time. We specialise in assisting SMEs and want to enable them to grow their business. Our approach is focused on establishing professional relationships with identified paymasters (ultimate users of client products – paying party), giving us the competitive edge to secure our transactions, allowing us to focus more on the merits of the underlying transactions and less on the risk of non-payment by clients.
SMEs are affected through extended payment terms created by medium and large corporate businesses. Therefore, the increase of working capital cycles for SMEs is a familiar problem. The cash flow pressure is filtered down to the SME sector where these entities are required to absorb the cash flow pressure. Most corporate businesses are continuously expanding their payment terms causing further cash flow pressure on their suppliers working capital. Hence, corporate businesses understand the need of invoice discounting and/or factoring.
We do not dictate the credit terms that will be used. We work on the credit terms that were negotiated by you and your client, be that 30 or 60 days after statement for example.
No, invoice discounting is available to all businesses that have a spread debtors book in good standing and one that does not exceed your creditor exposures. The business must be liquid and should make acceptable gross profits. As such, it is not necessarily linked to credit ratings.
To the contrary, Invoice Discounting is used by many large companies to improve cash flow, support growth and increase profits. Many of your customers may use this service themselves; globally it’s the fastest growing funding instrument to boost cash flow.