Advice

length:

 min read

published:

Original – 

Jan 8, 2023

Update – 

January 18, 2023

words by:

Steve Cater

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What is Invoice Discounting

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Invoice discounting is a financial solution that allows contract recruitment agencies to unlock the cash tied up in unpaid invoices, giving them access to the funds they need to continue operating and growing their business. This can be a valuable tool for recruitment agency owners who are looking to manage cash flow and keep their business running smoothly.

The process of invoice discounting typically works as follows:

  1. The recruitment agency sends an invoice to their client for the services they have provided.
  2. The invoice discounting company will then advance a percentage of the invoice value, typically between 80-90% (100% with Raise), to the recruitment agency.
  3. The recruitment agency can then use this money to cover their expenses, such as salaries, rent, and other operational costs.
  4. Once the client pays the invoice, the invoice discounting company will collect the payment and deduct their fee from the amount received.
  5. The remaining balance is then paid to the recruitment agency.

Invoice discounting is a flexible solution that can be tailored to meet the specific needs of the recruitment agency. Some invoice discounting companies will offer a revolving credit facility, which means that the agency can continue to draw down funds as they need them, while others may offer a one-off advance.

One of the key benefits of invoice discounting is that it allows recruitment agencies to access funds quickly, without having to go through the time-consuming process of applying for a loan or raising capital. This means that they can continue to operate and grow their business without having to wait for payments to come in.

Another benefit of invoice discounting is that it can help recruitment agencies to manage their cash flow more effectively. When invoices are paid late, or not at all, it can put a strain on the agency's finances and make it difficult to meet their commitments. Invoice discounting can help to mitigate this risk by providing a steady stream of cash flow.

Overall, invoice discounting is a valuable financial solution for contract recruitment agencies that can help them to manage cash flow and keep their business running smoothly. If you are a UK based recruitment agency owner looking to unlock the cash tied up in unpaid invoices, invoice discounting may be worth considering, get a quote today.

What is the difference between a confidential and a disclosed invoice discounting facility?

A confidential invoice discounting facility is a type of financing where a business sells its unpaid invoices to a lender, who then provides the business with an advance payment for the invoices. The lender then collects payment from the customers when the invoices are due. This type of financing is confidential, meaning that the business's customers are not aware of the arrangement and continue to make payments to the business as usual.

A disclosed invoice discounting facility, on the other hand, is a type of financing where the business's customers are made aware of the arrangement and make payments directly to the lender. The lender then provides the business with an advance payment for the invoices and collects the remaining payment when the invoices are due. This type of financing is disclosed, meaning that the business's customers are aware of the arrangement and make payments directly to the lender.

In summary, the main difference between a confidential and a disclosed invoice discounting facility is the level of transparency and customer involvement. A confidential invoice discounting facility is typically more flexible and allows the business to maintain its existing relationships with its customers, while a disclosed invoice discounting facility typically requires more coordination and direct involvement with the lender.

Steve Cater
 , 
VP Growth

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