What is Confirming?
Confirming is a financial service used to manage a company's payments to its suppliers. The financial institution that offers the Confirming advances the amount of the invoice in question to the supplier, who can collect this invoice in advance by financing it before its due date.
With Confirming, the customer company sending the bank the confirmed payment orders before their due date; then the bank informs the suppliers of the amount and payment date, and gives them the option to choose between collecting the invoice early by financing it, or waiting until its due date.
Types of Confirming
There are different types of Confirming according to the customer's payment method:
- Standard Confirming: This is the mode by which the bank manages its customer's payments to its suppliers, offering them the option to advance outstanding invoices.
- Financed prompt payment: In this mode the customer and the supplier agree to a payment date before the invoice's due date, and in exchange a prompt payment discount is negotiated for the invoice. With this Confirming option, the customer sends the bank the invoice to be paid, paying the supplier at that time, and thus financing the customer until the original due date of the invoices, when the advanced amount will be charged to the account, plus fees and interest.
- Financed payment: with this type of Confirming the customer pays the invoice to its supplier on the due date, and finances said payment for a specific term, after which the bank will charge the financed payment, plus fees and interest, to the account.
Confirming can also be classified according to who assumes the risk of non-payment:
- Confirming without recourse: the supplier does not assume any risk whatsoever if the customer does not pay.
- Confirming with recourse: the supplier assumes the payment if the customer does not pay.
Benefits of Confirming
Confirming offers benefits for both the customer and for the supplier. In particular, Confirming allows the customer to:
- Improve business relationships with its suppliers.
- Reduce administrative management.
- Possibility of obtaining a discount on its suppliers' invoices that is greater than the cost of the financing
- Finance payments to its suppliers.
Meanwhile, Confirming offers the supplier:
- A fast and easy management of its invoices
- To be paid up front or on the due date, as appropriate.
- Remove the possibility of non-payment in the case of Confirming without recourse
- Access to financing, without consuming its own line of credit.