Financing options of all kind come with their fair share of pros and cons. Their applicability, however, is not one and the same for all as companies come with varying needs and are a combination of various factors combined. Furthermore, it’s crucial that such methods are used properly otherwise their benefits would remain futile and so today we’re dishing out some Single Invoice Discounting tips to get everyone on the right track.
Understand how it works. Single Invoice Discounting is a type of receivables financing wherein cash is drawn up against a specifically chosen sales invoice. A cash advance is received by the company from the provider with the latter getting the invoice as security. The company goes on to use the funds as it deems fit and waits for its maturity to collect from the owing customer, after which it then goes off to pay the provider of the resources received in advance. This is the simplest and shortest way of putting things into perspective but if you’re planning to use it make sure to dig more and research to fully understand it and be able to address as to whether or not it’s the best option.
Screen customers to whom credit is extended. Since the method draws funds from sales invoices which are a result of a credit sale, it is therefore a must that the company already has strong and effective credit management procedures and terms. One of the important aspects to pay attention to would be credit screening. Make sure to extend credit only to those that are worthy and capable of repaying the debt at maturity. Don’t lean towards loose and lenient credit requirements and processes either. If an invoice is poor and the customer is not creditworthy, the Single Invoice Discounting provider may reject one’s application.
Only transact with trusted providers. Perform research, run background checks and look for reviews and feedback. Finding the best Single Invoice Discounting firm is just as crucial as determining which funding option to go for. Even if the method is beneficial, majority still lies on the quality of the service provided.
Opt for a confidential arrangement. Single Invoice Discounting can either be disclosed or confidential. Preference is the underlying concept here but if we were to suggest, we’d recommend the latter. This is to avoid any confusion in terms of collection in the perspective of the customer to whom the invoice is attached to.