As a small business owner or Amazon Seller, there’s one thing you’re always having to juggle — your cash flow. The health of your business depends on carefully managing your invoicing and financing to get the most out of Amazon, your customers, and your suppliers.
It’s a tricky balancing act, you need to:
- Create a reliable revenue stream.
- Ensure you have enough of a cash cushion.
- Generate enough “free cash” so you can continue purchasing inventory.
- Keep a large enough inventory so you can meet demand.
So, what do you do when it can take weeks to get paid by Amazon for the products you sell? There are a couple of options — invoice factoring and invoice discounting. These options together are known as “invoice financing.” An invoice on Amazon is equivalent to the orders that Amazon has agreed to pay you for – usually those marked shipment confirmed. Amazon then deducts their fees and deposits payment into your bank account every 14 days.
Get Paid Faster with Invoice Financing
Both invoice factoring and invoice discounting do something very important for your cash flow — they release the funds on your invoices almost immediately, so you can use that money to continue growing your business.
That matters because:
- You have the reassurance of knowing you’ll get paid almost as soon as your Amazon orders are completed.
- Your business will be more “cash rich” — always good for building a financial cushion and dealing with unexpected “surprises.”
Get money immediately, no waiting to get paid so you can:
- Pay employees and suppliers.
- Buy more inventory.
- Diversify your inventory and add additional product SKUs.
- Meet customer demand.
- That means more happy customers on Amazon, a higher number of successfully filled orders, and greater profits for your business.
Invoice financing can also really help if you have issues getting business credit.
Let’s dive into how invoice factoring and discounting work.
Invoice Factoring
How invoice factoring works:
- You sell a product/service.
- You generate an invoice for that sale.
- You sell those invoices or accounts receivable to a factor.
- The factoring company pays you a proportion of the total invoice amounts up-front (normally between 70% and 85%).
- The factoring company receives payment on the invoices.
- Upon payment, the factoring company sends the remainder of the money to you, less a fee for their services.
- Typical fees run between 2% and 4% of the total invoice amount.
Invoice Discounting
How invoice discounting works:
- You sell a product/service.
- You generate an invoice for that sale.
- You approach a specialist invoice discounting lender.
- They lend you up to 95% of the value of the invoices as an advance.
- Funds are made available up to certain value of the invoice within 24-48 hours.
- You collect payment on the invoices as usual.
- Once you have collected the money, you repay the lender.
- The lender charges a fee for their service to be paid with the loan repayment.
The Differences Between Invoice Factoring and Invoice Discounting
The main difference between the two different types of invoice financing are who collects the payments:
- With invoice factoring, the factoring company collects payment directly from your customer because they’ve technically purchased the accounts receivable.
- With invoice discounting, you’re still responsible for collecting payments. The invoice discounting company simply gives you a cash advance loan that you have to repay.
- In order to take advantage of invoice discounting, you’ll likely need to have good business credit, business history of more than one year and a business checking account.
One advantage of invoice factoring is that you no longer have to worry about invoice collection — that can free up your time to work on expanding your business.
Ultimately, the choice of whether to use invoice factoring or discounting depends on your unique needs and business history, but both of them give you a big advantage as an Amazon Seller and business owner.
Payability Gives You a Fast Payment Solution for Outstanding Amazon Payouts & Invoices
Payability specializes in helping Amazon Sellers like you. When you use invoice financing companies, the fees you pay account for their operational costs and the risks they’re taking on by assuming your debt to provide you funds in advance. We can provide you with superior invoice financing, starting at just 2% of the overall invoice amount. We’ll help you grow your business, get started with Payability today.
