- 05 Nov
Invoice Discounting Service Charge Average Percentage
Invoice discounting service charge is often the term people use when referring to the "administration charge" made for invoice discounting services. It is the percentage of your turnover that you pay the funder to use the service.
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To compare the fees between providers, quoted for the same customer situation, we estimated the facility usage and used that to calculated estimated fees for our prospective customer. We used the same projected turnover and facility usage projections across all providers, making the comparison fair.
Service charge, or admin fee, is the "headline rate" that many people use to compare different invoice discounting offers, often ignoring the other charges, that can form a large percentage of the overall costs.
We have undertaken a lot of research comparing prices between different invoice discounters, and we identified an 86% difference between the cheapest invoice discounting companies and the most expensive.
Invoice Discounting Average Service Charge Percentage
Looking at those results, I have identified the percentage of the charges quoted that were service charge, rather than discount charge (any other additional fees were ignored for the purpose of this comparison).
For normal, recourse style confidential invoice discounting, the service charge represented 59% of the total fees quoted by the provider. Across the quotes that we obtained for a given customer, the range of quotes included service charge accounting for between 49% and 66% of the total cost (with the remainder being discount charge).
Average Charges For Protected Invoice Discounting (PID)
Looking at the quotes received for non recourse style, protected invoice discounting (also called PID), the service charge accounted for 69% of the total fees quoted, with the range being from 59% to 75%.
We often see examples of customers comparing quotes based on either just service charge (admin fees) or discount charge - which works in a similar way to interest, hence people are often drawn to comparing that figure as you might for an loan or overdraft. What these results show is that both service charge and discount need to be taken into consideration, as they both tend to account for significant proportions of the costs that you will be quoted for invoice discounting.
The wide ranges within the results show that failing to consider one or other element could result in a completely misleading comparison of the fees between providers. My recent post about another example of how fees are broken down may be of interest to you. It was an extreme case where 82% of the fees were service charge, but the customer was hung up on getting the lowest discount rate, when that had the least influence on the bottom line cost.
The way that invoice finance prices are calculated is confusing, and we are always available to help you understand the quotes you have received, and get you the best prices that we can find you. On average, we have been able to save our clients 31% on fees quoted elsewhere (updated October 2019). Call Sean on 03330 113622 for help with quotes.
- 16 Sep
Video Explaining Invoice Finance Pricing
I have just posted the latest of a number of short videos on YouTube relating to invoice finance. This particular video focuses on invoice finance pricing. It's only 30 seconds long so it won't take up much of your time.Specifically it focuses on explaining pricing and highlights some of the huge differentials in price between different providers. We have discovered these through our research...
- 01 Aug
The Price Of Delaying Moving Invoice Finance Companies
A recent example of a cost saving that we have found for an invoice finance client, demonstrated just how great the cost can be of delaying moving between invoice finance companies. This particular client is currently paying a lot in fees, so the savings are great. However, even average users of receivables finance may be missing out on savings, if they delay moving providers. Every month that...
- 30 Jul
Example Of Single Debtor Invoice Finance Pricing Selling To GRI
We have dealt with a number of recruitment companies selling to GRI (formerly De Poel), and this is an example of a recent quote for a single debtor invoice finance deal, that we sourced for a client.REQUEST YOUR QUOTEThe client was turning over c. £500K per annum and only selling to GRI. The quote was for recourse factoring, that means they receive prepayments against invoices (in this case at...
- 28 Jun
Single Fee Invoice Finance.
Single fee invoice finance (IF) is where the pricing for an invoice finance facility is structured such that there is only one fee percentage that the customer pays. This will typically be a percentage of the invoice value.The normal method of costing and IF arrangement is to charge two fees (plus additional charges which may, or may not be included within a single fee structure). Firstly, a...
- 16 May
Tips To Get The Best Invoice Finance Pricing.
Whether you already use invoice finance, or are looking at the products for the first time, you are likely to want to secure a facility at the best pricing that is available. We spend all day, every day getting invoice finance prices for companies, so we put together our top tips to getting the best invoice finance pricing.If are looking to get a good deal these are a few tips that might be...
- 03 Oct
How Invoice Finance Broker Commissions Work
I have been on the subject of pricing misunderstandings for the last few days and another incident worth sharing occurred with a car body repairer that we were speaking to.SEE HOW MUCH WE CAN SAVE YOUCar body shops that invoice insurers for crash repairs are highly suited to factoring, the nature of the papertrail for each transaction means that the funders, though specialist, can offer very high...
- 02 Oct
Is Bad Debt Protection Included In Your Invoice Finance Quote
Leading on from my previous post about explaining how to compare invoice finance quotes, and how customers often focus on minor components of the overall cost - rather than those that really make the major difference, I saw an example of confusion over whether or not bad debt protection is included in an invoice finance quote.The answer is that it depends on the provider.Some invoice finance...
- 04 Jun
4 Simple Ways To Reduce Your Factoring Costs
If you are an existing factoring user, and you are looking for ways to reduce the cost of factoring, we have set out below four simple actions that you could consider.The cost of factoring is constantly changing, rates have moved over the last 12 months. In addition to this, the rates offered by different factoring companies will vary dramatically. In a recent study, we found that there was...
- 23 May
How We Found A Cheap Factoring Quote Less Than 2K A Year
We have just found a really cheap factoring quote for a prospect, that is worthy of sharing, at less than £2K per annum - all inclusive.The small micro business has a low level of annual turnover, hence they are very price conscious. They want to factor all their invoices, so it is a whole turnover facility.Factoring will provide them with both funding against their sales ledger, and a credit...
- 18 May
Summary Of Our Invoice Finance Pricing Research
This post pulls together all our research, and information, regarding invoice finance pricing and prices.GET A PRICE QUOTEOur free receivables financing guide describes both how the products work, and also how the pricing is structured. It also sets out minimum costs for full turnover products, which start from c. £3,000 + VAT per annum - selective products (typically costing c. 2% per month)...
- 03 Apr
The Cheapest Invoice Finance Company
If you are looking for the cheapest invoice finance company, you may be surprised to know that there is no single company that answers this description.The cost of an invoice finance facility depends upon a number of factors, and the cheapest provider for any particular circumstances varies according to those circumstances.We have undertaken extensive research into the pricing of invoice finance...
- 29 Mar
Is Invoice Finance Expensive?
Is invoice finance expensive?The answer to the question is that it doesn’t have to be. However, if you choose the wrong provider, you could end up paying more than you need to.Our research has shown that overall pricing for, as an example, a factoring facility can vary by 165% from the cheapest quote to the most expensive. We also saw an 86% differential between the top and bottom of the...
- 18 Mar
Service Charge 67% Of Overall Recourse Factoring Fees
After recently reviewing the result of our confidential invoice discounting (CID) pricing research, I looked back at our recourse factoring pricing study, which completed about a year previously.The results were similar in that they showed a wide range of pricing differentials between the top and bottom ends of the market, in fact the range was a staggering 165% between the cheapest and most...
- 14 Mar
Why You Should Not Just Compare Invoice Discounting Pricing Percentages
So often we speak to customers that are comparing various offers for invoice discounting, and their key measure for comparison is the headline administration (often wrongly referred to as service charge) charge percentage.With an offer for invoice finance, you normally are quoted a service fee (or administration fee for invoice discounting), a discount charge (similar to interest) and then there...
- 02 Feb
41% Cost Saving On Invoice Finance
You may be forgiven for thinking that any existing users of invoice finance will have moved providers, and will be benefiting from the lowest prices that are on the market, but that is clearly not the case. This was highlighted in the case of a prospect that we assisted over the last few weeks.They spoke to us regarding an existing invoice financing facility, that was being provided by a bank...
- 29 Jan
Service Charge & Discount Charge Differences Between Invoice Discounting Companies
I recently reported the 86% differential between the cheapest and most expensive quotes that we received for a particular client situation. This difference was based on a comparison of the anticipated charges that might be levied by different invoice discounting companies.I thought it might be interesting to look in a bit more depth at the components of those costings, and how they vary between...
- 24 Jan
Invoice Discounting Minimum Monthly Fees Charges Compared
I was asked to clarify if minimum annual fees are still charged monthly, and how many providers offer a flat fee structure (as opposed to charging a percentage of turnover). The answer is that most providers have moved away from quoting a minimum annual fee, towards quoting minimum monthly fees. The effect is the same, but I guess the number presented to a prospective client seems much smaller...
- 23 Jan
41% Cost Saving On Recourse Factoring
One of the things that we pride ourselves on is keeping up to date with pricing around the factoring market, so that we can find the best rates for our clients.In a recent example we were able to find a c. 41% projected cost saving for a prospect, on the fees that they were already paying - this equates to a substantial annual cost saving for the company.This particular example involved a company...