Confirming

Confirming is a financial procedure through which a financial institution takes over the management of payments from a company to its suppliers if the company is unable to meet the payment deadlines set by the invoice issuance. This maintains trust in the relationship between the parties, as payment of the issued invoices is guaranteed.

These invoice payments can be made in advance, in which case the financial institution will charge suppliers a fee and interest based on the duration of the advance. Alternatively, payment can be made on the invoice’s due date.

Using this financing option offers significant benefits for all involved parties. For the issuing company, it means lower administrative costs and tax deductions that provide greater liquidity, as well as freedom from worrying about meeting payment deadlines, since the financial institution takes on this responsibility. For the suppliers receiving the payment, it provides greater liquidity as they can choose to advance the receipt of funds whenever they wish, ensuring that business trust between both parties remains intact.

There are different types of Confirming tools, which include the following:

Simple: This is when the supplier opts to receive payment on the invoice’s due date.
Investment: Payment of the invoices is made effective before their due date. If this option is chosen, the client benefits from a small financial discount when repaying the credit.
Financing: Payment of the invoices occurs after the due date has passed, requiring the client to pay the bank a surcharge for this transaction.

In these transactions, the risk of non-payment is always borne by the financial institution providing the service, making it a non-recourse process where the issuing company is free from any risk of payment failure.

One drawback of this financial tool is that it cannot be applied to countries using currencies other than the euro, meaning companies with foreign suppliers outside the eurozone cannot take advantage of it.