Invoice discounting is a financial service that helps allow organisations/businesses to get cash in advance based on their unpaid invoices. In such a way, they can have access to their accounts receivable ledger. The money that comes from a discounting company act as a lender. Organisations or businesses accept unpaid invoices as proof. These invoices are known as accounts receivable. Once the suppliers get paid, they can return the borrowed money to the lending organisation.
This blog helps you understand invoice discounting and how you can benefit from it:
How does Invoice Discounting Work?
Invoice discounting investment is overdraft protection on your accounts receivable. Supplier
Here is a step-by-step procedure followed by invoice discounting companies like Falcon:
Step: 1 - Customer purchases goods from the suppliers.
Step: 2 - Supplier issues an invoice with deferred payment terms of up to 4 months.
Step: 3 - The supplier submits all the invoices to the invoice discounting platform company. This invoice mainly serves as collateral to get short-term capital.
Step: 4 - The invoice discounting platform cos can use invoice discounting as short-term capital for their businesses to boost the necessary cash flow. Companies assess the supplier's creditworthiness and invoice validity. Then, it agrees to advance an invoice value percentage. Usually, this percentage goes up to 95% of the total invoice value.
Step: 5 - The customer pays invoices per the agreed payment terms.
Step: 6 - Once the customer makes the payment, the supplier will repay the invoice. Or. otherwise, the customer pays the invoice directly to the invoice discounting company.
What are the benefits of invoice discounting?
Invoice discounting offers numerous benefits, such as:
Some invoice discounting companies like Falcon offer quick access to the accounts receivable ledger of businesses.
The services of Falcon offer a stable cash flow stream. This is very much important for the businesses to grow.
Getting invoice discounting is simpler and easier than applying for bank capital.
Mostly, invoice discounting companies in India, like Falcon, are independent of long-term repayment agreements.
Suppliers will likely get the approval for invoice discounting but not bank capital.
Usually, invoice discounting is confidential.
Falcon allows businesses to do better planning and forecasting.
If you obtain invoice discounting, you can use that money for various purposes, such as:
Falcon Group
Buying more stock and raw materials.
Taking on temporary employees in a busy period.
Investing in the business growth.
Surviving the challenging period of trading.
Conclusion;
Invoice discounting allows organisations and businesses to maintain a steady cash flow. It is essential to grow a business. When a business uses invoice discounting, a lender pays them money for certain invoices. After receiving the payment from the customer, the business repays the lender. Besides, invoice financing offers invoice factoring. If you are looking for trusted invoice discounting, Falcon is there to help you. We are one of India's reputed invoice discounting companies; feel free to contact Falcon Invoice Discounting Platform. Hope this article helps you :)
