Though convenient, manipulating accounts receivable is very much a possibility. Here are some of the challenges faced in Invoice Discounting :
- Double Financing: According to reports, roughly 0.05%(point zero five) to 0.1%(point one) of invoices generated and paid are duplicate and on an average costs a medium sized firm with a turn over of $100Million over three years, a handsome sum of $0.3Million.
- Banks not readily giving loans: Because of the tedious process involved in checking the legitimacy of each invoice, banks or finance companies avoid financing to SME’s or lower ticket accounts.
- The growth of SMEs is stagnant: Trying to avoid this human error, finance companies consider only large invoices from well-established companies as collateral neglecting the small to medium sized enterprises.
- Restricted privacy: Right to information makes a company vulnerable and also puts the brand image at stake in case of any errors or defaults on payments.
- Reducing Popularity: Due to better alternative schemes standing in the financial market, the traditional ID (Invoice Discounting) market is experiencing a reduction in clients.