What is Retailing the Invoice?
Retailing the invoice is a business practice that involves offering customers the option to purchase goods or services at the invoice price, instead of at the retail price. This practice is also known as invoice discounting, invoice financing, or invoice trading. It is a form of trade finance that can be used to help businesses manage cash flow and get access to working capital.
How Does Retailing the Invoice Work?
Retailing the invoice works in three steps:
- The seller sends an invoice to the buyer for the goods or services provided.
- The buyer pays the invoice at the invoice price, instead of the retail price.
- The seller then pays the difference between the invoice price and the retail price to the financier.
The financier, usually a bank or financial institution, pays the seller the invoice price upfront so that the seller can manage their cash flow. In exchange, the financier is able to collect the difference between the invoice price and the retail price from the buyer. This difference is referred to as the ‘discount’.
Benefits of Retailing the Invoice
Retailing the invoice provides businesses with a number of advantages, including:
- Increased cash flow: By allowing businesses to access cash earlier, invoice discounting can help them manage their cash flow more effectively.
- Reduced borrowing costs: By taking out a loan for a shorter period of time, businesses can benefit from lower interest rates.
- Better terms for buyers: Buyers can benefit from lower prices on goods or services, as they are paying at the invoice price rather than the retail price.
Conclusion
Retailing the invoice is a popular business practice that can help businesses manage their cash flow, reduce borrowing costs, and provide buyers with better terms. It is a form of trade finance that can be used by businesses of all sizes. For more information on retailing the invoice, please visit: