• Single Invoice Discounting and What it Means to a Company

    Jul 18

    Business is a risk and success comes with a lot of hard work and not to mention resources. This is why companies take it very seriously when we talk about financing. It’s a sensitive and crucial aspect because no entity will function without money. This is also the reason why entrepreneurs have come to identify single invoice discounting as one of their biggest and most effective tools. But what is it and what does it do?

    Selective, spot or single invoice discounting is a type of receivables finance. Because sales occur either on cash or on credit, there lies a discrepancy between sales level and actual cash received. Credit sales are not bad at all but because they translate to receivables, they can mean illiquid funds. Cash won’t be available for use until the invoice matures and the customer pays up.

    This can be a problem because what if the business needs immediate financing or if it requires a certain level of resources for its operations or an expansion venture. Moreover, liquidity is something that investors look at and too many receivables isn’t that much attractive.

    invoicediscountSingle invoice discounting helps solve those dilemmas and more. In this arrangement, the company chooses a specific invoice to discount. In exchange of an advance of its value, it shall use the said invoice as a form of security or guarantee to the provider. Once it matures and becomes collectible, the company receives payment from the owing customer. After which, it then goes off to pay the provider the amount received plus fees.

    The very reason as to why single invoice discounting works is because it is very fast. Unlike most financing options available in the market today, it only takes at least as fast as twenty four hours to process it and cash can be released afterwards. This is a stark contrast to other options which can take weeks or even months.

    Moreover, it is not a loan so it does not reflect as a liability in the accounting books. Single invoice discounting is an asset transaction so it also comes free of interests and property collaterals. Because it is a onetime transaction, the fee is also a onetime deal. There are no lengthy contracts too. Plus, it helps hasten collection, improves liquidity and cash flows as well as strengthens working capital. It’s even perfect for immediate and emergency needs which is why companies love it a lot.

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