Options to advance the collection of an invoice
Within the business world, in addition to generating resources, it is essential to have them available whenever they are needed.
To achieve this much-needed liquidity, advance an invoice It is an alternative to take into account, as it will allow you to make that work or service billed available.
A descriptive example:
Imagine that today you have invoiced 200.000 euros that you will be paid in three months, but just this week you have committed payments for a value of 50.000 euros and you lack that money, since all your treasury has been used up in order to invoice those 200.000 euros.
At this time, you are facing a cash imbalance due to needing money that you do not have.
What can you do?
The early collection of invoices often becomes a necessity.
Do you know what options you have?
When should you anticipate the payment of an invoice?
No doubt:
The sooner you collect your invoices, the better for the economic and financial health of your business.
However, it is not always possible to get clients to accept the payment terms you want.
The question to address would be if it benefits you anticipate an invoice and collect it in advance, even if it has an economic cost to do so.
The advance of invoices is recommended in the following cases:
- You have run out of liquidity and you need the money to face short-term payments that, otherwise, you will not be able to assume. For example, if you have to stock up to provide a service and you lack working capital to do so.
- The economic costs of the advance are lower than the profitability that you will obtain being able to dispose of that money today.
Main methods of early payment of invoices
If you have come to the conclusion that you need anticipate the billThe next question is knowing how to do it.
For this, there are different alternatives with differential characteristics, which we will summarize for you.
advance invoice
This alternative consists of invoicing a partial payment in advance of the provision of the service or the sale of the merchandise that is the subject of the commercial relationship between the parties.
Advance invoices hardly differ from the usual ones, except that they include that word in their concept.
However, we must bear in mind that even if the final invoice is issued in another quarter, the taxes on this advance invoice will be paid today.
The main problem with this option is that you need to convince your client so that they agree to pay you certain amounts in advance, often having to resort to a discount for early payment.
invoice advance
El invoice advance o Factoring as a Financial Tool for Managing Seasonal Fluctuations in Trucking It is an agile and practical financing alternative to obtain liquidity.
Consists in assign the right to collect an invoice to a third party in exchange for obtaining the money today without waiting for maturity.
You'll find two types of invoice advance, with differentiated costs:
-> With resource
In the event of non-payment, both the debtor and the assignor are jointly and severally liable for the invoice.
-> No recourse
The creditor assumes the non-payment in case it occurs, being the claimable credit only towards the debtor. Therefore, the advance cost is higher than in the previous case.
Confirming
A formula with a certain resemblance, although different, is the confirming.
It is a financial service focused on managing payments from a company to its suppliers.
That is, in this case it is the payer who contracts this option.
The chosen financial entity is in charge of carrying out the payment of the agreed payments, normally defined globally.
When the time comes, the bank informs each recipient of the payment date.
However, it gives you the ability to collect early if you pay interest according to the lead time.
Also, as in the previous case, you can do with or without recourse, depending on who assumes the default.
The problem with this alternative is that the confirming lines are approved for companies with a certain size, track record and solvency.
So it may be that many of our clients do not offer us this form of payment.
promissory note discount
We can also ask our client to pay us the invoice by issuing a promissory note.
In this way, we do not interfere with the client's payment forecasts, since the promissory note will be payable at maturity and we will be able to make a promissory note discount that will allow us to collect it before its expiration date.
For more information, ask us without obligation about the promissory note discount.
As you see, advance an invoice to collect is possible, although it usually has a previously agreed cost.
However, there are financial solutions to protect you against liquidity problems that may affect your company.
Know all the advantages you can get with the financing of companies from Workcapital
