Factoring Versus Invoice Discounting
Factoring and Invoice discounting both provide the needed cash. With factoring you receive a full sales ledger service management and debt collection service that is disclosed to the customer. In invoice discounting the sales ledger management and collections is your responsibility. These funding options are available to companies which provide a product or service on credit terms. The purpose of this is to have access to immediate funds, without the wait of receiving customers payments. Essentially, factoring is the sale of accounts receivable invoices to a 3rd third party. The 3rd third party assumes the obligation of collecting on the invoice. Usually, you will receive 70 per cent to 90 per cent of the invoice amount which will later be followed by an additional payment once the invoice has been collected.