Logical

What is Confirming with Proper Definition, Explanation, types and advantages

The Confirming is a financial service that lets you manage payments from a company to its suppliers . The financial entity that offers the Confirming advances the amount of the invoice in question to the supplier, who may collect this invoice in advance, financing it, before its due date. What is Confirming its types and advantages

The operation of Confirming begins with the sending to the bank by the client company of the confirmed payment orders before their expiration; Subsequently, the bank informs the providers of the amount and the date of payment, and gives them the option to choose between charging the invoice in advance, financing it, or waiting for its due date.

Types What is Confirming its types and advantages

There are several types of Confirming according to the customer’s payment formulas:

Standard confirming : it is the method by which the bank manages its client’s payments to its suppliers, offering them the option of anticipating their pending invoices.
Prompt payment financed : in this modality the client and the supplier agree on a payment date prior to the expiration of the invoice, in exchange a discount is negotiated for prompt payment of the invoice. In this Confirming option, the client sends the bank the invoice that he has to pay, paying the supplier at the moment, thus financing the client until the original expiration of the invoices, date on which he charges the advanced amount, plus commissions and interests. .
Financed payment : in this type of Confirming, the client pays the invoice to his provider on the due date, and finances said payment within a certain period, after which the bank will charge the financed payment, plus commissions and interest.

Confirming can also be classified according to who assumes the risk of default :

Confirming without recourse : the provider assumes no risk in the event of non-payment by the customer.
Confirming with recourse : the provider assumes the payment, in the event of a non-payment by the customer.

Advantages

Confirming offers advantages for both the customer and the supplier. In particular, Confirming allows the client :

Improve business relationships with your suppliers.
Reduce administrative management.
Possibility of obtaining a discount on the invoices of your suppliers higher than the cost of financing
Finance payments to your suppliers.

For the supplier , for its part, Confirming facilitates :

An agile management of your invoices
Charge in cash or at maturity, as appropriate.
Eliminate the possibility of non-payment in case of Confirming without recourse
Access to financing, without consuming your own line of credit.

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Mohammad Asif Goraya

M A Goraya has qualification of M.phil in Agricultural Sciences. He has almost 15 years of teaching Experience at college and university level. He likes to share his research based knowledge with his students and audience.