For many businesses, long invoice cycles is an unfortunate reality. Waiting for 30 to 90 days to receive the payment directly impacts the working capital of the business. This further affects the cash flow and creates various operational challenges such as paying salaries, procuring new supplies, etc. Fortunately, there are several financial assistance available for businesses to access working capital and gain a competitive edge. One of the most popular short-term financing options available is “Account Receivables Discounting”. Also known as “Invoicing Discounting” or “Bill Discounting”, this service allows businesses to get access to cash flow, thus ensuring smooth business operations.
Receivable discounting is a form of asset financing in which a business benefits from a short-term loan against its account receivables. It can be used for various reasons and inevitably support the business by generating cash-flow and can help avert working capital challenges. This is sometimes also referred to as receivable discounting loan, invoice discounting, or invoice financing.
Receivable discounting is a process where capital is provided to a business against receivables such as unpaid invoices. Typically, 75–90% of the invoice value will be funded by an investor. This money will have to be returned with interest within a stipulated tenure; generally 30–90 days.
KredX has simplified the process for businesses to get hold of this benefit.
In essence, both these options provide short-term working capital quickly. However, with receivables factoring, the financial institution takes over the procedure of collecting invoices, following up on late payments, and the company’s accounts. With invoice discounting, the business retains control over these factors.
Recording a discount on note receivable is a 5 step process.
Some of the goals of account receivables are as follows.