What Pitfalls are there with Invoice Discounting?
Service charge – this is levied on turnover including Vat. Notice how many of the invoice discounters web sites and literature do not make this clear. Minimum charges – 0.3% of a £200/£300,000 turnover business does not sound too bad but beware, most invoice discounters have a minimum charge of at least £8,000.Fortunately we know the invoice discounters who specialise in the SME market and they have much lower minimum fees. Advance levels – do not believe what the glossy brochures tell you. Advance levels up to 90% are the exception, not the rule. Invoice discounters conduct regular audits during which they will look at the levels of contras’, credit notes/returns, invoices over 90 days old and customers exceeding their credit limits. Once these are taken into account the true level of advance is more typically 70/75%. You need to be realistic about this. However, some invoice discounters do not apply credit limits at all, potentially releasing 10-20% higher funding than other invoice
