Confirming is a contract that corresponds properly to an assignment of payments by a company to a financial institution. Normally, payments from suppliers or certain suppliers, which are managed by the financial institution, are included in the confirming. The contract usually includes the possibility that providers can collect these debts before maturity, through the discount.
Confirming allows the company that hires you not to have to make payments on the specific dates contracted, but when it suits them. In these cases, the financial institution manages the payments and makes them at the expiration, also offering the provider the possibility of charging before the expiration date, by confirming, making a small discount.
Normally, financial entities perform this type of services for large companies, public companies, administrative entities or companies with notorious solvency.
How does confirming work?
After sending the invoice by the supplier to the corresponding entity, and following the payment method agreed between the parties, the financial entity will send a document stating the date on which the corresponding invoice can be presented for collection. Likewise, the possibility of early payment with a discount is pointed out.
An example of an agreed payment method that includes confirming can be, payment within 60 days from the invoice date, by means of confirming from a certain financial institution.
Sometimes, in the same letter, the financial institution also offers the provider the possibility of buying other credits Similar. If you answer that you agree and we send other similar invoices, you can extend the possibility of early payment, with a discount, to those invoices.
In the most common classification, we see that there are two types of confirming depending on who assumes the risk of non-payment of the invoice or invoices:
- Confirming with recourse: if the risk of default corresponds to the supplier, that is, the one who charges through confirming.
- Confirming without recourse: if the risk of non-payment corresponds to the financial institution.