Depending on the original agreement, if this is a "confidential" invoice discounting agreement, the customer pays to the trader (as he thinks) but the money is actually paid into the invoice discounters bank. Whether paid by BACS or by cheques, they are made out to the trader but banked into the discounters bank account without the knowledge of the debtor.
It's correctly stated above that the discounting account should be treated as a bank control in your accounts. The liability of the debtor is still there until they pay the invoice. The cash advance is just that, it is not in settlement of the invoice which remains outstanding.
If the invoice remains unpaid after the credit period, the discounter "reverses" the funds advanced and adds it to the reserve which they hold. This then reduces the cash availability to the trader.
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Invoice Discounting
Depending on the original agreement, if this is a "confidential" invoice discounting agreement, the customer pays to the trader (as he thinks) but the money is actually paid into the invoice discounters bank. Whether paid by BACS or by cheques, they are made out to the trader but banked into the discounters bank account without the knowledge of the debtor.
It's correctly stated above that the discounting account should be treated as a bank control in your accounts. The liability of the debtor is still there until they pay the invoice. The cash advance is just that, it is not in settlement of the invoice which remains outstanding.
If the invoice remains unpaid after the credit period, the discounter "reverses" the funds advanced and adds it to the reserve which they hold. This then reduces the cash availability to the trader.