Confirming

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Within the business world, one of the concepts, perhaps less well known, is to confirm. It is an administration of payments between clients and suppliers, but it goes much further.

If you wish know what it is to confirm, What are the types that exist, how they work and the advantages and disadvantages they have, here we have prepared practical information about it.

What is confirming

According to the RAE (Royal Spanish Academy), the confirmation is conceptualized as follows: "Contract by which a financial institution undertakes, in exchange for an economic consideration, to administer the payment of an entrepreneur's debts."

In other words, it is about offer a service through which the payments that a company has for its suppliers are managed, being able to enable payments before or on the due date of the invoices they present.

How confirmation works

How the confirmation works is quite easy to clarify. On the one hand, we have a financial institution (which is usually the one that manages this). This assumes the responsibility of making the payment of a series of invoices issued by the suppliers. Said payment can be made before the invoice's due date, or on that date, and in this case it is usually the supplier who decides (based on what is convenient for him).

The invoice, therefore, must be sent to the financial institution, mientras que el client debe tener suficiente liquidez para asumir del monto de estas facturas. A pesar de todo, además puede suceder que el cliente pague esa cantidad posteriormente de la fecha de vencimiento de la factura. Si eso sucede, regularmente es la entidad financiera la que actúa como fuente de financiamiento para el cliente, pagando al proveedor y posteriormente recuperando ese dinero con el pago del cliente (y este posteriormente asume intereses y gastos).

Confirmation types

Within confirm, there are three types, and each of them has a way of acting that you should pay attention to. These are:

With and without advance credit

They are two types within the same group since there is an unanticipated commit, or one with.

In the case of anticipation, what it does is that suppliers can receive payment before the date truly required, thus assuming interest and expenses. In other words, we would talk about paying something before receiving it, but with the assurance that it will be received, of course.

When there is no anticipation, then it is that the payment of those products to the suppliers will be made according to the date of the invoice on which it is due, in other words, when the invoice must be paid, and not before.

Confirming with and without recourse

Another type of confirmation you have is that of with or without recourse. Namely, if there is certainty on the part of the providers that they will charge your invoice, whether the client pays or not (it would be without recourse); or if the suppliers will be responsible for the non-payment if, when the due date arrives, the client does not pay the invoice.

According to the customer's payment date.

In this circumstance, we are talking about a type of confirmation based on the Time when the customer pays it. And for this case there may be several assumptions, such as that it does it before the payment due date, that it does it on its due date, or even that it does it later, in this case running with the interest and expenses that it entails. .

Bank or non-bank confirmation

To finish, you have two different figures, the bank confirming and the non-bank confirming.

What is banking? It is where a bank provides the service. This is the most common since it is the one used in all the previous ways.

What is a non-bank one? Where who provides the service is not a bank. In this circumstance, finance companies are operating but they are not banks.

The advantages it offers you

After knowing what commit is, how it works, and the types that exist, you may still be wondering if it is best for you. And if we can say that It has several advantages, both for customers and suppliers. But what are these? We talk about them:

Advantages of confirming for customers

In principle, one of the first advantages that customers will have is undoubtedly savings in payment management costs. In other words, you will not have a person in charge of managing the payments, because it is not necessary. At the same time, by giving a secure collection option to providers, you will be giving them security and your brand will grow since it will mean that you are serious.

Al mismo tiempo, evitas problemas con los pagos, y eso ayuda a que la vinculación con los proveedores be mejor, debido a que conocen que van a cobrar y que no va a pasar nada que pueda afectarlo.

For providers

One of the advantages is greater liquidity, at the same time of not having to make use of financing lines (and thus avoid future problems). At the same time, they can have two options, either to anticipate the invoices, or to wait for the payment date.

The downsides of confirming

Now, as we have told you about the advantages (and how good it is to confirm), we cannot help but explain that not everything is good. There are some drawbacks that you should pay attention to when thinking about these payment dynamics.

And what problems can the confirmation give? As we have done with the advantages, we divide it below:

For clients

In the case of customers, betting on confirming does no other payment methods can be used. At the same time, it is the customer himself who has to bear all the responsibility and commitment for having decided to order the product.

For providers

Suppliers have a great "danger" with confirming because they are the ones who have to bear the cost of the advance and that, at times, especially in certain products, it can be extremely expensive. And what is more, It is no longer the one who says to collect first; it is the customer who gives the payment order, not them.

And, another drawback is the fact that international payment transactions are not accepted, especially when operating in the non-euro zone.