Introduction
Bill Discounting is a smart working capital solution that allows businesses and startups to convert unpaid invoices into immediate cash. Instead of waiting 30, 60, or 90 days for customer payments, businesses can discount their bills with a financier and maintain smooth cash flow.
This Saving Mantra guide explains a clear, practical, and business-friendly step by step process for bill discounting, including benefits, risks, and best practices.
Step 1: Understand What Bill Discounting Is
Bill discounting is a short-term financing method where:
- A business sells its unpaid invoice to a financier
- The financier pays a large portion upfront
- Customer pays the invoice on due date
- Financier deducts charges and releases balance
It helps businesses bridge cash flow gaps efficiently.
Step 2: Identify When Bill Discounting Is Needed
Bill discounting is ideal when:
- Sales are made on credit
- Customers have long payment cycles
- Working capital is blocked in receivables
- Business wants growth without equity dilution
It converts receivables into usable funds.
Step 3: Check Eligibility for Bill Discounting
Financiers usually assess:
- Creditworthiness of the buyer (debtor)
- Valid and accepted invoice
- Business transaction history
- Industry and risk profile
- Invoice tenure and value
Strong buyers increase approval chances.
Step 4: Decide Which Invoices to Discount
Businesses should select:
- Approved and undisputed invoices
- Invoices issued to reputed customers
- Short to medium tenure invoices
- High-value receivables for efficiency
Not all invoices are suitable for discounting.
Step 5: Prepare Required Documentation
Typical documents include:
- Copy of invoice
- Purchase order or contract
- Proof of delivery or service completion
- KYC and business registration documents
- Bank statements
Accurate documents speed up disbursement.
Step 6: Choose the Right Bill Discounting Partner
Bill discounting is offered by:
- Banks
- NBFCs
- Fintech platforms
- Trade finance institutions
Compare interest rates, fees, tenure, and turnaround time.
Step 7: Submit Application & Invoice Details
Once selected:
- Upload invoice details
- Share customer confirmation if required
- Complete digital or physical verification
- Await approval decision
Most platforms offer quick approvals.
Step 8: Invoice Verification & Approval
The financier verifies:
- Authenticity of the invoice
- Buyer acceptance
- Delivery or service completion
- Payment terms and due date
Verification protects against fraud and disputes.
Step 9: Receive Upfront Payment
After approval:
- A major portion (usually 70–90%) is credited upfront
- Funds are received within a short time
- Business uses funds for operations or growth
This improves liquidity immediately.
Step 10: Customer Pays on Due Date
On maturity:
- Customer pays the full invoice amount
- Payment goes to the financier or escrow account
- Settlement process is triggered
Customer payment discipline is critical.
Step 11: Settlement & Balance Release
After receiving payment:
- Financier deducts discounting charges
- Remaining balance is released to the business
- Transaction is closed
Charges depend on tenure and risk profile.
Step 12: Understand Costs & Risks
Key considerations include:
- Discounting fees or interest cost
- Buyer default or payment delays
- Disputed invoices
- Recourse vs non-recourse terms
Understanding terms prevents surprises.
Common Bill Discounting Mistakes
- Discounting disputed invoices
- Ignoring buyer credit risk
- Overdependence on discounting
- Not understanding recourse clauses
- Poor documentation
Avoiding these ensures sustainable usage.
Why Choose Saving Mantra for Bill Discounting Support
Saving Mantra helps businesses with:
- Bill discounting eligibility assessment
- Lender and platform selection
- Documentation and application support
- Cost-benefit analysis
- Working capital strategy planning
We help businesses unlock cash flow without stress.
Conclusion
Bill discounting is an effective way to accelerate cash flow, fund operations, and support growth without raising equity. With the right invoices, credible buyers, and transparent terms, businesses can use bill discounting as a powerful working capital tool.
Follow this step by step bill discounting process to turn receivables into growth capital.
Disclaimer
This blog is for informational and educational purposes only and does not constitute legal, financial, or investment advice. Bill discounting terms, costs, and eligibility depend on lender policies, buyer creditworthiness, and transaction structure. Readers are advised to consult qualified financial professionals before availing any bill discounting or receivables financing facility.