There are two main purposes for utilising the services of a company offering invoice discounting in Edinburgh. Firstly, invoice discounting offers an advantage to customers in that it enables them to receive a discount off their invoice amount. The second benefit of turning to invoice discounting in Edinburgh is the ability it gives for drawing money from its own accounts receivables. Therefore, it is a method of short-term financing for businesses so that they can improve their cash flow as well as draw further working capital from the company.
To achieve this, the business borrows a certain percentage of its accounts receivables through invoice discounting in Edinburgh. The report of the accounts receivables is then broken down into columns denoting time, for example, present customers and 30, 60, 90 and 120 days past due customers. It is important that, should the business want to borrow against its own accounts receivables, it sees that most customers are in the ‘present’ column. This is accomplished by offering the customer a discount for paying within a certain timeframe, specified in the agreement upon the first time that the business and the customer did business together.
The business utilises the discount’s financial advantages to borrow money. It uses its unpaid accounts receivables as collateral, which also explains why it is important for them to have a clean accounts receivable report. The company receives cash from the unpaid invoices, which improves its financial position as well as repaying interest to the company offering invoice discounting to Edinburgh businesses. This arrangement is not usually made known to the customer.