TOOLS

Invoice Finance ^Calculator

The Invoice Finance Calculator helps you estimate the cash you could release from outstanding invoices. This tool suits businesses looking to bridge working capital gaps by unlocking funds tied up in invoice financing. If you need tailored offers or assistance, consider using a platform like Funding Agent, which can help source options and manage paperwork. Understanding advance rates and discount fees is vital for evaluating costs effectively.

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How To Use The Invoice Finance Calculator

Gather Invoice Data

Collect details such as the invoice face value, the agreed advance rate, the annual discount margin, expected days outstanding, and any fixed service charge in your facility terms. Knowing these figures ensures accurate input for the calculator. For more on required details, see accounts receivable.

Enter Figures Accurately

Input each value into the corresponding fields. The calculator will then display the advance released today and the total cost over the invoice's life. Accurate entries help avoid miscalculations; understand terms better via invoice discounting.

Review Cash and Cost

Compare the advance amount with the fees shown. Use the calculator to test different advance rates or days outstanding to see how changes affect your cash flow and cost. This helps decide if funding meets your needs at reasonable expense. Learn more about fees at invoice factoring.

^Benefits of Using the Invoice Finance Calculator

An Invoice Finance Calculator is a valuable tool for businesses, particularly those that rely on invoicing customers, as it provides an easy way to determine the potential cash flow available through invoice financing. By entering outstanding invoices, businesses can quickly estimate the funds they could access, allowing for better financial planning and management. This tool helps companies make informed decisions about using invoice finance as a strategy to maintain liquidity and operational efficiency.

Using this calculator before agreeing to a facility helps ensure the advance covers essential outgoings like payroll or supplier payments. It estimates the real borrowing cost and assists in benchmarking different providers on like-for-like fee terms. This preparation supports more informed funding decisions. You might also explore the top invoice finance lenders for better insights.

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How Invoice Finance is Calculated

Advance Amount Formula

Advance equals invoice value multiplied by advance rate.

Advance Amount Formula

Advance = Invoice_Value × Advance_Rate. The Invoice_Value is the total amount due on the invoice. The Advance_Rate is typically between 70% and 90%, representing the portion the funder releases as cash upfront. Multiplying these gives the immediate cash you receive.

Discount Fee Formula

Interest cost based on funds in use and days outstanding.

Discount Fee Formula

Discount_Fee = Advance × (Annual_Discount_Rate ÷ 365) × Days_Outstanding. The Annual_Discount_Rate is usually a spread over an interest base like the Bank of England base rate or SONIA. Dividing by 365 converts it to a daily rate, then multiplying by Days_Outstanding gives the total interest charge for the funding duration.

Service Fee Formula

Flat fee charged on invoice face value or turnover.

Service Fee Formula

Service_Fee = Invoice_Value × Service_Fee_Rate or a fixed flat fee. This fee may be quoted as a percentage of the invoice amount (for example, 0.5%) or a monthly flat charge as stated in your facility agreement. Adding it to the Discount_Fee gives the total cost of the invoice finance product.

Understanding Your Invoice Finance Calculator Results

Check Net Advance

Focus on the actual cash arriving today after deducting fees. Assess whether this amount bridges your working capital gap adequately. Clear understanding helps manage cash flow effectively. For context on working capital, see cash flow.

Run Sensitivity

Adjust the advance rate or expected payment days in the calculator to see how improvements like faster debtor payments or higher release percentages affect net funds. This aids scenario testing and planning.

Account for Extras

Remember that setup fees, audit charges, or credit protection costs are often not included in this model. These can increase overall borrowing costs and should be clarified with your provider before committing. For deeper fee understanding, visit the discount rate entry.