While Small & Medium Enterprises (SMEs) navigate through many uncertainties in their daily course of business, the ones that are most challenging are usually related to liquidity caused by delayed payments. Especially when there is certainty on the payment from the Buyer, but ambiguity on the duration and timing of the payment.
Bill discounting is one of the easiest and fastest ways to monetize a receivable. SMEs receive payments early on their accepted invoices against a discount/fee. Thereby easing out the peaks and tufts in their daily cash cycle.
Understanding Bill Discounting
Bill Discounts or Invoice Discounting is a method of discounting receivables and getting paid early against an accepted invoice against for a Discount/Fee. The Buyer/Financer pays the seller the bill amount minus the Discount/Fee on an agreed date before the credit period expires.
The advantage of using this solution is the Sellers can dynamically manage their financial situation. Discounting unpaid bills, SMEs can get instant access to funds without any hassles.
How is Bill Discounting done?
- The seller raises an invoice against the corporates. In general, the contracted credit period ranges from 30 days to 120 days
- To receive payment early, the seller views these invoices on the discounting platform and requests for early payment against a Discount/Fee.
- On the agreed date, the invoice will be discounted, and the payment is remitted to the sellers’ account.
- Multiple business cycles could be completed during this period.
Bill discounting offers funds instantly as there is no need to wait for 30 to 120 days. In addition to the same, the additional liquidity allows the seller to use the cash to rotate the capital more effectively, leading to higher turnover with an improved cash flow and revenue cycle.
MSMEs are activity using bill discounting platforms to their advantage, fulfilling their cash flow requirements over a completely digital medium.
When MSMEs apply for traditional business loans, they indulge in multiple verifications, collaterals, and lengthy paperwork. All these make the process of getting funds cumbersome and time consuming. However, with bill discounting the entire process takes less than a minute with zero documentation, meaning that the funds are received faster without the formalities, compliances while being completely collateral-free.
Bill discounting platform helps the supplier to get the payment against the invoice raised to a buyer at a discounted rate. Have a look at some significant benefits of using bill discounting platforms:
- Reducing outstanding receivable, from 30 -120 days down to a couple of days
- Collateral-free finance
- Digital request with zero documentation
We leverage technology to offer smart working capital solutions for Buyer/Supplier and Financers. For more information, please contact us at info@xpedize.com.
TReDS then debits the financier and pays the seller. The amount gets credited the next working day into the seller’s bank account. The second part of the transaction is when the amount is repaid to the financier. MSMEs, corporate buyers and financial institutions are thus linked on a common platform. After both sellers and buyers approve, the financier may bid on the invoices and make the payment to the seller.