Bill Discounting is a trade-related activity in which a company’s unpaid invoices which are due to be paid at a future date are sold to a financier (a bank or another financial institution).
In bill discounting, the business discounts the outstanding invoices to gain access to short-term financial assistance and maintain it’s working capital. This process is also called “Invoice Discounting”. This process is governed by the negotiable instrument act, 2010. Factoring & Reverse Factoring are two methods a bill is discounted. Both the methods are designed to speed up and increase cash flow without disturbing the balance sheet.
Factoring is a financial transaction and a type of debt or finance in which a business sell sits accounts receivable (i.e., invoices) to a third party (called a factor) at a discount. Benefits of factoring is working capital optimization, credit protection against bad debts, No collateral required, prompt payments for your invoices.
Reverse factoring, also known as supply chain finance or supplier finance, is a financial technology solution that mitigates the negative effects of longer payment terms to help buyers and suppliers optimize working capital. Benefits of reverse factoring Improved cash flows, reduce dearly payment requests, Low interest rate of interest, Develop long term relationships.
Talk to us to understand how you can reduce the burden of receivables and raise funding assistances against them
