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Dear sir,
I just wonder the reason why invoice discounting is usually only offered to companies meeting a minimum turnover criterion. I think , firstly, if not, we will suffer a lot , secondly, although the company with minimum turnover cannot pay back, we will not suffer much loss. But I am not sure.Invoice discounting is not usually only offered to companies meeting a minimum turnover requirement.
I think maybe you are confusing it with factoring. Some people use the same terms, but as far as Paper F9 is concerned, invoice discounting is not the same as factoring.
It is the solution mentioned in ” discuss the ways in which factoring and invoice discounting can assist in the management of account receivable”
Have you watched my lectures on the management of receivables (together with the lecture notes)?!
If you have then you will see that invoice discounting can exist on its own and apply to just one particular invoice. Then there is no minimum turnover required.
You will also have seen that it is also one of the services that a factor may offer to provide. In that case it will apply to all invoices. Then, as with all factoring, the factor will usually stipulate a minimum turnover to make all the work involved worthwhile for them.
A company with a large turnover is actually likely to be less risky, but the factor will make their own decision on this and will decide whether or not they are prepared to provide the service (and, of course, what fees they will charge).
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