Published by The Finance Place · Updated · General information
“My customers take 60 days to pay”
Map when you incur costs, invoice and actually collect cash. If you pay weekly wages but customers settle two months later, a profitable order can still create a cash gap. Finance may help bridge it, but first review deposits, staged billing, customer terms and credit control. Do not fund disputed invoices as though full payment is certain.
Compare wider working-capital options →Factoring versus invoice discounting
With factoring, the provider typically handles collection and sales-ledger support as part of the arrangement. With invoice discounting, the business usually retains collection responsibility. Confidentiality, customer contact and control depend on the agreement; discounting is not automatically confidential. Choose around the credit-control capability your business actually has.
Advance percentage is not the net cash figure
A provider may exclude disputed, old or otherwise ineligible invoices, restrict exposure to one customer, or hold a reserve. Apply the advance percentage to the eligible amount, then allow for reserves and fees. The part not advanced is normally a balance to release after payment, subject to charges and the facility terms. It is not automatically the price of the finance.
- Prepare an aged debtor report, customer concentration breakdown and credit notes or disputes.
- Explain contractual retentions, stage payments and evidence of completed delivery, particularly in construction.
- For recruitment, reconcile approved timesheets, payroll timing and customer settlement dates. These operating details matter more than an industry label.
Separate the service fee from the discount charge
A service fee may depend on turnover and have a monthly minimum. A discount charge works like interest on funds used over time. Compare the reference rate and margin, fee basis, minimum charges, audit costs, credit protection and termination notice. A longer customer delay normally adds finance cost even if the advance percentage stays the same.
Test a 30-day customer-payment delay →What happens if the customer does not pay?
With recourse, the provider can require the business to repay an advance on an unpaid debt. Non-recourse or credit-protection terms have exclusions and limits; they do not necessarily cover disputes or every debtor. Ask who carries each risk and what happens to availability if a large customer pays late. A cash-flow plan should allow for facility withdrawal or reduced eligible debtors.