Invoice discounting is an important consideration for many companies operating out of different sectors across the world. Quick working capital solutions offer an impressive edge that can be utilised for leveraging better modes of functioning in the long term. The question, however, is often if taking up invoice discounting is the right solution for your business in the first place. Here is an article that explores this question further.
The Sector You Cater Towards
There are certain sectors that fit invoice discounting practices very well. This includes, manufacturing, construction, sales and distribution. This is mainly because for most of these industries, invoice payments traditionally take a long period of time. Bypassing the time constraint historically placed in regards to payments can make a big difference in how these companies work. Significantly, invoice discounting will also play a big part in letting companies that would otherwise be preoccupied with acquiring working capital, grow as self sufficient organisations that can focus on developing themselves further. Hence, if the idea of growth remains paramount to your company’s primary objectives, invoice discounting has the potential to pay rich dividends.
Having Reliable Customers
The crux of invoice discounting is in smooth transactions and a client base that pays their dues on time. This is because invoice discounting is heavily dependent on blue chip companies that addresses their dues in a time honored manner. As an business owner, you have to be in possession of professional customers who prioritizes timely payments. Initiating invoice discounting services with an awareness of fluctuating payment schedules from your customers would subsequently defeat the whole purpose of invoice discounting. Hence, it is very important to be aware of the reliability of your own customer base before taking up the service.
The Question of Turnover
Invoice discounting practices are usually focused on a certain class of companies which meet the turnover stipulation that is deemed satisfactory for a stable business operation. Ideally, this number is placed in the margins of fifty lakhs to one crore. This helps invoice discounting spotlight organisations that are well on their way to attaining optimal growth but are hampered down by the system of latent payments that have dogged the manufacturing industry for so long. Small and medium scale industries for their working practices are a perfect fit for invoice discounting practices as they fit the criteria that could well benefit from the service in the long term.
Keeping Confidentiality As Priority
Confidentiality is an important reason why invoice discounting is generally considered as a much better option than invoice factoring. With invoice discounting you have the option to not reveal to your customers that you are making use of the service. This is not possible with invoice factoring as the service requires you to handover the collection rights for your invoices to the factoring company in question. If you feel that the client base you have cultivated over the years will be much better served without the awareness that you are taking up an invoice discounting service, this can be very much possible.
Essentially, invoice discounting is a method of financing that offsets many traditional blockades that stop a company from growing further. It solves the question of reliable working capital procured in a timely fashion and can further nourish your company by letting you focus on the future instead of mere survival. KredX also offers an invoice discounting service that is tailor made to benefit your business in the best of ways and offer an important leeway for fast paced financing in the future.