Invoice factoring is a popular form of invoice financing that involves selling your unpaid invoice to a third-party. Opt for invoice factoring and you’ll be handing over the responsibility of chasing up payment to an outside company, leaving you free to focus on other matters. Invoice factoring could be the right solution for you if your invoice is overdue; you don’t think the client in question will be using your services again, you don’t mind the client knowing you’ve got a third-party involved or if you don’t have the time or in-house department needed to chase up overdue invoices yourself.
Should I consider invoice discounting?
The other main form of invoice financing available to you is invoice discounting. With invoice discounting, you borrow money against your invoice and settle your debt once it has been paid by your client. You remain wholly responsible for contacting your client to get the invoice paid. This could be your best option if you have a good relationship with your client and don’t want to jeopardise it by asking a stranger to contact them, you expect they will be buying products or services from you in the future, your invoice isn’t actually overdue but you simply need to access funds quickly and you have no problem with pursuing payment yourself.
Make the choice that’s right for you and your business
There are many reliable, reputable and efficient companies that can help you if you are interested in invoice factoring or invoice discounting. It could be wise to speak to around three or four companies so you can compare what they have to offer and come to an informed decision. You will usually be able to keep around 85-90% of what you are owed once the financier’s cut is taken into consideration.