What is confirmation

Start » Financial management » What is confirmation

In the article Difference Between Confirming and Factoring we could see a preview of what is confirmation. Now that you know what it is about, let's delve deeper into this financial service that can help you achieve your business goals. In this post, we'll see what does confirmation consist ofWhat are your main advantages for each of the agents that participate and the reasons why they opt for this service. 

What does confirmation consist of?

The new forms of business that have emerged in recent years need new financial solutions, not only for those who depend on their liquidity to consolidate as a company, but also for providers who need a security for your transactions with debtors. 

Faced with these numerous needs, financial institutions, both public and private, come into play to satisfy them. The big problem of public entities are the requirements that must be met to obtain this type of service. That is why the so-called alternative financing arises, a term that determines the activity of Alter Finance and other similar ones. 

Ultimately, it is a service offered by a specialized financial institution to a user who uses it as a means of payment and to cancel debts owed to your creditors. Upon the due date of the debt, the entity provides a check or transfer on behalf of the client, thus canceling the existing debt. 

Therefore, the main functions of this service can be summarized in these three points:

  • Management of customer payments to their suppliers: The processing of payments becomes the task of the financial institution that offers the service. It is therefore an administrative outsourcing.
  • Supplier financing: allows suppliers to advance collections of customer invoices. 
  • Insolvency risk coverage: the provider obtains insolvency risk coverage from the customer at the time the financial institution anticipates payment of the invoices. 
 

Advantages of confirming

The advantages of this service are different depending on the agent that participates, for this reason we present them to you broken down below:

Advantages for the customer who hires the service

  1. Administrative management savings: In this sense, the savings are very large, since the time and resources necessary to process all these payments are reduced. All the necessary procedures are borne by the financial institution that offers the service. 
  2. Better treasury management: Treasury planning can be improved by advancing payments to suppliers and preventing long-term expenses. 
  3. Image enhancement: Commercial agreements with suppliers will improve because the client offers an image of solvency and the ability to access external financing. 
  4. numerous financial advantages:
  • Increase significant of the income thanks to discounts on supplier financing.
  • Extension of payment terms to its suppliers, reducing the financing needs of working capital. 
  • punctual financing treasury Derived from payments to suppliers charged to confirming policies. 

Advantages for customer suppliers

  1. Savings in administrative management: Savings in the entire process of managing collections from the client, since this function is transmitted to the client. 
  2. Better access to credit: Suppliers obtain immediate financing of their accounts receivable, without having to assume risks from financial institutions. 
  3. When financing is non-recourse, the provider improves its liquidity and solvency short term.
  4. Punctuality in payments: This allows providers to better plan their treasury, counting on the fact that the financial entity will issue the collection on the stipulated date.

Advantages for the entity that offers the service

As it is a new service, it gives the financial entity the possibility of expand its range of services and attract new customers.

Why opt for confirming?

The security in the Commercial transaction is the most important thing. This service offers that security to both the client and its suppliers. The advantages are numerous for the agents involved in the operation, and facilitates the financing of working capital for the companies. 

In a society like today's, this type of resource is necessary above all for those companies that are starting in the market and they seek to gain a foothold among all their competition. If you like learn more about this service, here we leave you more information:

Confirmation for companies

Leave a Comment

English (UK)