Bill Discounting: the secret to getting paid faster

 

Introduction

Bill discounting is a way to get paid faster by selling future payments on your receivables at a discount. You sell those future payments at a discount and use the proceeds from that sale to pay down some of your current liabilities. That reduces the amount due, which means you'll have less cash tied up in accounts receivable or other current assets when it comes time to pay your bills. In this article we'll discuss what bill discounting is and how it can help accelerate your cash flow by allowing you to collect money for goods or services before they're even delivered.

What is Bill Discounting?

Bill discounting is a financial arrangement between a buyer and a bank. The buyer pays for goods or services, but then uses the bank to pay for them instead of paying directly to the seller. The bank buys bills from the company that issued them, usually at a discount from their face value.

The buyer benefits because he gets paid immediately; however, he pays for this convenience with lower profits on his purchases (because he’s paying less than what is owed). In addition, he may have to pay extra fees and interest rates if the terms of his contract don’t specify otherwise.

When to use bill discounting

The main reason to use bill discounting is to get paid faster. You should consider it if your customer wants to pay you faster, or if you need to get paid faster.

It's also worth noting that bill discounting can be a good way to avoid haggling over payment terms with your customer—and potentially saving yourself some headaches in the process!

How does it work?

Export bill discounting is an alternative to invoice financing, which allows businesses to borrow money against their outstanding invoices. In fact, bill discounting is similar to invoice financing in that it offers faster payment terms than traditional bank loans. But unlike invoice financing (which involves a third-party lender), bill discounting occurs between two parties: the supplier and the buyer.

An important difference between these two methods of funding is the fact that lengthy documentation isn't required for bill discounting—all you need to provide is your business's credit rating and proof of earnings. The benefit of this streamlined process? It gets payment into your hands sooner so that you can get back on track with running your business!

How do you qualify for bill discounting?

·         You must be a registered business.

·         You must be able to provide a bank statement showing a healthy cash flow.

·         Your credit rating must be good, or the risk of non-payment is too high. As such, it’s usually only available to companies with an annual turnover of more than $200K or who have been in business for at least 12 months.

·         And you should have a good relationship with your bank; they need to trust that you won't default on your loan repayment obligations (and this trust can take time).

Conclusion

Bill discounting is a great way to get paid faster. But just like any other financing option, it’s not right for every business. You need to make sure that the benefits outweigh any costs or risks before you make the leap into bill discounting. We hope this article has helped you understand what bill discounting is and how it works, so that you can decide whether or not this type of financing could be right for your company!