- 11 Jan
Sales Ledger Finance Versus Factoring
Sales ledger finance and factoring are two types of receivables finance (also sometimes called invoice finance), whereby the core service provided is that a prepayment is given against outstanding accounts receivable, that are owed to a business.
Whilst this funding is nearly always part of a factoring service, there are some "service only" facilities that provide only the credit control without prepayments.
Sales Ledger Finance Compared With Factoring
Sales ledger finance is often used to describe a service whereby you only receive those prepayments (although many parties refer to this as "invoice discounting", using the terms interchangeably), whereas factoring is normally applied to a service where there is also a credit control service provided, in addition to prepayments against unpaid invoices. Sales ledger management is often also listed as a service under a factoring facility. That means handling the task of maintaining a full sales ledger (sales invoice, credit notes and payments applied to debtor accounts). This ledger is used as the basis against which to provide funding.
However, some people use the term "sales ledger finance" to describe any whole turnover receivables financing product i.e. finance against your sales ledger (as opposed to just selected invoice - which is know as selective invoice finance or spot). This indicates the minefield of technical terms that are used within the receivables financing sector. Different providers will title their services differently such that an important part of the role of a broker is understanding, and explaining, these differences between providers.
Another key difference between sales ledger finance and factoring is that factoring delivers a lower risk product to the funder, hence they tend to be more liberal in terms of who they will offer it to. Even companies that are in financial trouble, or facing insolvency may be able to access factoring in order to improve their cash flow position. There is often a premium charged to offer the credit control element of a factoring service, however, in some cases the gap between the cost of invoice discounting and factoring can be less than you might imagine, making the addition of the credit control service good value.
Explaining Invoice Financing
In our free guide to invoice financing (which has links to our guides to "types of invoice discounting" and "types of factoring", we set out, and explain, all the different styles of facility that you are likely to come across. Across those three documents there is a comprehensive list of the various terms that are used within our sector, although there are often brand names that are introduced to further complicate matters.
Getting Help Understanding And Comparing
If you need some simple help understanding what is available, and how sales ledger finance compares versus factoring, or other product names, it may be best to speak to Sean on 03330 113622 for a chat without any obligation.
- 11 Apr
Reverse factoring (sometimes called Supply Chain Finance) is a financial facility that a large company can arrange with a financier, providing a factoring service to some or all of their suppliers. It turns the whole factoring model upside down. Instead of individual suppliers having their own facilities, the substantial debtor puts in place an umbrella arrangement that benefits all (or some) of...
- 29 Jan
Credit To Pay For Raw Materials
Persuading suppliers to provide you with a sufficiently large enough trade credit to allow you to source all the raw materials that you need can be difficult. We have come across situations where manufacturers end up having to phone around suppliers in order to purchase the supplies that they need. This is why many manufacturing companies turn to invoice funding as a solution.If you are unable...
- 09 Jan
Alternatives To Funding Your Business With Your Own Personal Funds
When you run your own business you often end up putting in your own money, using your personal funds to keep the business going. It's the easiest of the sources of business funding, as you don't have to apply (if you already have the money) and business owners often have a "self sufficient" attitude that they don't want to turn to external sources of finance.The dangers of using your personal...
- 11 Dec
Business Cash In Time For Christmas
It's still not too late to get business finance in place in time for Christmas (just!) - but if you delay much longer the opportunity will have passed, until next year.APPLY NOWI posted the other day about how the Christmas period puts additional cash flow pressures on businesses, what with having to pay staff early, bonuses and a slow down in customer payments.Maybe you have been putting off...
- 18 Aug
Who Can Use Invoice Finance?
This is a reminder of who can meet the acceptance criteria to use invoice finance. There is a form of receivables funding to suit just about every type of business.Pretty much any industry sector has a form of receivables finance available. There are certain sectors that commonly use these products, the latest UK Finance (the industry body for receivables finance) statistics to the end of Q1 2018...
- 14 Aug
Receivables discounting, sometimes called accounts receivable discounting (or A/R Discounting), is a business financing facility whereby the debts that your customers own you are sold to funder at less than the full face value i.e. at a discount.FIND OUT THE COST OF RECEIVABLES DISCOUNTINGReceivables means the monies that you are owed by customers. These can be invoices for goods or services that...
- 19 Jul
Invoice Finance Despite Sale Or Return Terms
Normally finding invoice finance when a large customer trades on "sale or return" terms (SOR) would be impossible. However, we have just completed such a deal for one of our clients.Sale or return means that the customer receives your product and they can return it if they are unable to sell it. If they can sell it they pay for it. Invoices are often raise before the outcome of their sales...
- 29 Jun
Examples Of Invoice Finance Funding Lines We Have Arranged
Looking back over the invoice finance funding lines that we have arranged for clients over the last few months, the size of the funding lines put in place ranges quite dramatically.The invoice finance funding lines we have facilitated ranged from just £8K up to £1m, and all points in between. Quite a few have been around the £150K to £200K mark and there have been a few larger lines e.g....
- 21 May
Accounts Receivable Funding
The frustration of looking at a large sales ledger of unpaid invoices for sales, whilst having an empty bank account, can be debilitating. Not to mention the problems it causes in paying your creditors, suppliers and staff.When you first make a large sale, the feeling is exhilaration at having closed a deal. However, there can often be significant delays between making a sale, delivering the...
- 20 Apr
Transportation Factoring Companies
Transportation and distribution are key sectors for the use of factoring services. Many companies within those sectors use this form of funding, in order to unlock cash to improve their cash flow.Transport companies accounted for 6.6% of all clients of members of the ABFA (now UK Finance) as at the end of December 2017. Distribution companies accounted for 23.5% of client numbers, at the same...
- 05 Apr
5 Things To Check When Completing Your VAT Return
As it is coming to the end of the VAT quarter again, I thought I would make a list of the five things that I check regarding each VAT return. The list is not intended to be comprehensive, and we are not providing any accounting advice, rather this is a list of the items that I check.If like us your accountant produces your VAT return, you will still need to check that the figures are...
- 01 Apr
Leveraging Target Company Assets To Raise Money For An Acquisition
We have continued to work with a number of parties who are looking to make acquisitions by leveraging the assets of the target company that they are acquiring. This is a way to raise part or all of the purchase price to pay for the business that is being acquired.This methodology of raising acquisition finance is not widely known, but it can be an excellent way of facilitating the acquisition of...
- 28 Mar
Funding For A Car Crash Repairer Within 3 Days
This is a great example of how quickly a car crash repair company can get funding against their invoices.We were contacted at 4:30pm by a car crash repair company that had an invoice for £4,000 that they wanted to receive funding against. The way that this type of car repairer finance works is that they receive 100% of that invoice value, less a fee for the transaction.The actual enquiry was...