Which statement accurately describes invoice discounting compared with factoring?

Which statement accurately describes invoice discounting compared with factoring?

• A. In factoring, the finance company takes over debt collection
• B. In invoice discounting, the debt collection is outsourced
• C. In both, the debt collection is outsourced
• D. In invoice discounting, the business retains control over debt collection

Answer: (D)

Control of debt collection is what sets invoice discounting apart from factoring. In invoice discounting, the business keeps responsibility for chasing customers and managing the sales ledger, while the finance provider simply advances funds against the invoices and may monitor activity. The customer relationship and credit control remain with the business. In factoring, by contrast, the finance company typically takes over the debt collection and manages the sales ledger for the business. So the statement that the business retains control over debt collection in invoice discounting best describes the comparison.

Control of debt collection is what sets invoice discounting apart from factoring. In invoice discounting, the business keeps responsibility for chasing customers and managing the sales ledger, while the finance provider simply advances funds against the invoices and may monitor activity. The customer relationship and credit control remain with the business. In factoring, by contrast, the finance company typically takes over the debt collection and manages the sales ledger for the business. So the statement that the business retains control over debt collection in invoice discounting best describes the comparison.