Invoice Discounting – The ‘annual review’ and escape lane

Invoice Discounting is increasingly being used as an alternative to overdrafts (often at the instigation of the bank). You review your overdraft annually (although you might prefer not to!) but how many businesses do a review for themselves of what they are getting from their invoice discounting provider? Most packages are agreed on a notice period (varying from one month to 2 years) and just roll on. Many businesses find themselves a few months into a contract and conclude that they like the product but not sure they are with the best provider – but inertia then sets in. This is an increasingly competitive market with a number of new providers.

My other ‘drum banging’ message is that there is a right time to go into Invoice Discounting but that there is also a right time to come out of it. Not many businesses plan as to how they are going to ‘wean themselves off’ this source of funding and find that they are locked into it.

My recommendation: make a diary note to review your package at least annually and have a strategy for getting out of it – if that is the right thing to do financially. Happy to help with that process.

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