1/14/2024 0 Comments Define invoice discountFirst, a percentage of the value of the invoices (likely to be in the range 0.1 – 0.6 per cent), and second, a discount fee (think of it like interest) for the period between the prepayment and when the customer pays the invoice in full. ![]() This fee, the cost of invoice discounting, is usually in two parts. When the customer pays, you receive the balance that hasn’t already been prepaid by the discounter (in the case above this would be 10 per cent) less their fee. Invoice discounting is the process whereby a seller effectively sells their invoices to a financier (discounter) as soon as they are raised and can receive payment up to 90 per cent of the invoice value within hours. What is invoice discounting? How does it work? This all puts pressure on working capital and that’s where invoice discounting comes in. If your new customer is larger than you then you will probably find it necessary to meet those expectations. In Portugal or Turkey, for example, companies may demand 90 or 120 day terms (and sometimes even longer) simply because that is the norm in their own country. Generally, the further south you go in Europe the expectation is that payment terms will be longer. Here, sales are made on 30 or 30 days net, maybe 60 days at a push. Invoice financingĬompanies that are growing and possibly looking to sell overseas, either for the first time or moving into new export markets, will very soon discover that terms of trade outside the UK can be very different from the domestic market. ![]() Peter Brinsley, director of SME finance consultancy Point Forward, explains this finance option and how it could help your business with your international goals.
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