Confirming: What is it and how does it help you manage your invoices?

In order for entrepreneurs to focus all their attention on key areas of their startup, there is a wide range of services that facilitate and simplify business management. One of them is confirming, which, in essence, allows companies to leave the management of payments to their suppliers in the hands of a bank or financial institution.

BBVA Spark, the best ally of high-growth companies, offers this payment management service as part of its wide range of financing solutions specifically designed to meet the needs of entrepreneurs. Through this service, suppliers obtain greater security in the payment of invoices and the founders of startups and scaleups can more easily access financing thanks to the confidence provided by a payment guarantee backed by a reliable entity.

But how exactly does this service work, and what benefits does it bring to the different parties? Throughout this article, we will study the definition, types and advantages of confirming as a payment system for companies and suppliers.

The key things about confirming (and how it differs from factoring)

In confirming, the company assigns the control of the administrative process of payment of its financial obligations to a bank, in order to guarantee said payments in a timely manner. The bank, on behalf of the debtor company, sends the confirmed payment orders to the creditor company and is responsible for paying them on their due date. In other words, with confirming, a financial entity assumes the responsibility of guaranteeing that all invoices are paid on time, as an external administrative service taken out by the company.

In addition, this service allows the supplier to request the collection of payments in advance, in exchange for a commission to the entity for the advance payment of the invoices. Thus, confirming can be a very useful tool for suppliers to obtain liquidity quickly.

Confirming is not to be confused with factoring, which is a service whereby a company transfers its invoices to a financial institution, which advances the amount in exchange for a service fee and then takes charge of managing the payment with the debtor. Factoring would therefore help companies that need liquidity to obtain it in advance, without having to wait for their customers to pay them on the due date of the invoices.

In short, factoring is a collection service, whereby the company requests the bank to prepay the promissory notes it has issued in order to obtain liquidity, while confirming is a payment service, which allows a company to delegate the management of its invoices to a financial institution. For example, let’s imagine a startup that wants to make its supplier payment processes more efficient after paying an invoice late. In order to do this, it would take out the confirming service, from which it would have the support of a third party in this process and would be sure to meet all its financial obligations on time.

What are the advantages of confirming for startups?

Without the necessary administrative and financial resources, managing payments to suppliers can be a challenge for emerging companies. Financial solutions such as confirming help entrepreneurs keep their invoices up to date, among other advantages.

• Greater flexibility in the management of payments. As they are managed independently by financial experts, the company’s payments are made in a timely manner, avoiding extra charges.
• More security for investors. Confirming guarantees the timely payment of invoices, which gives investors more confidence and helps the startup to attract financing.
• More time and capital. The entrepreneur can optimise administrative tasks, saving resources and personnel costs, as well as having more time to dedicate to other valuable tasks.
• Increased liquidity. For both the creditor (the supplier) and debtor (the startup or scaleup): the former can advance the payment of invoices over 90 days in exchange for a small commission to the bank; and the latter can finance its payments to suppliers within a certain period of time.

The different types of confirming

There are different types of confirming available to entrepreneurs and business owners, depending on the conditions agreed with the financial entity as to who assumes the cost in the event of non-payment and when the invoices are settled.

Depending on who assumes the risk:

• Confirming without recourse. The financial institution assumes the risk in the event that the debtor does not make payment.
• Confirming with recourse. The supplier assumes payment in the event of non-payment by the customer.

Depending on the payment method (cash, due date or financed):

• Standard confirming. The financial entity cancels invoices on their due date.
• Financed prompt payment. The supplier requests the financial institution to pay the invoice before its due date, in exchange for a fee.
• Financed payment. The entity cancels the invoice on its due date, but the debtor finances the payment of the invoice for a certain period of time with the consequent commissions and interest.

As a payment management system, confirming has numerous advantages for both the startups that take out this service and their suppliers. Client companies are relieved of the worry of managing the execution of their invoices and being aware of due dates, while creditors enjoy the guarantee or even the advance payment.

With an extra dose of trust and the know-how of BBVA Spark, this solution is an interesting option for startups and scaleups that want to simplify day-to-day procedures to focus on what is really important: growing their business.