The Complete Process of Bill Discounting
Bill discounting is a financial service where businesses sell their trade receivables to financial institutions at a discounted rate. It helps companies maintain healthy cash flow and manage working capital effectively. Key Steps in the Bill Discounting Process Step 1: Submission of Bills Businesses submit their invoices or trade receivables to a bank or financial institution for discounting. Step 2: Verification of Bills The financial institution verifies the authenticity of the submitted bills. This involves checking the transaction details and the buyer’s creditworthiness. Step 3: Assessment and Approval Based on the risk assessment, the bank determines the discount rate and approves the bill for financing. Step 4: Disbursement of Funds After approval, the bank disburses funds to the business, deducting the agreed discount. This amount is typically around 70% to 90% of the bill value. Step 5: Collection from Buyer On the bill’s due date, the financial institution collects the full p...