» Difference Between Sales and Purchase Invoice Finance?

Planning to get a quick business loan through supply chain finance but confused by its two types? Well, in today’s post we will explain the difference between sales invoice finance and purchase invoice finance to help you decide which form of supply chain finance is a better option for your business.

As you know, supply chain finance helps buyers and suppliers in a supply chain to streamline their finance and align their organizational goals by working together with a financial service provider like LivFin. Opting for supply chain finance can speed up the payment cycles, help in optimizing inventory and provide valuable working capital for smaller enterprises in the supply chain. Bigger players in the supply chain benefit from automated invoice payments, extended billing cycle and timely delivery of goods, raw materials and services for their own operational requirements.

Supply chain finance has two sub-types – sales invoice finance and purchase invoice finance. To understand how they work, we must first understand the documents that are required for getting the business finance.

What is a Sales Invoice?

It is a document that is generated by a seller of goods and services. The invoice lists the items that have been purchased by the customer and their respective quantities. It presents a total amount owed by the customer after deducting any given discounts. The sales invoice represents the revenue earned by a company. The due date on a sales invoice marks the money which is still outstanding from the customer’s end. 

What is a Purchase Invoice?

It is a document that is issued by the purchaser of goods and services, confirming that the order is indeed valid and has been fulfilled by the seller. This invoice is created after the purchase order which is issued by the purchaser to the seller. The due date on the purchase invoice is the date by which the purchaser commits to pay the seller for the itemized goods and services.

Also Read: Difference between Supply Chain Finance and Trade Finance

So, now that we know how a sales invoice and purchase invoice are different, it is very easy to understand difference between sales invoice finance and purchase invoice finance.

Sales Invoice Finance

In this kind of business finance, the seller of goods and services presents the invoices for which the payment is due from their commercial partner to a non-banking financial company like LivFin. After due diligence, the NBFC offers up to 100 per cent finance in lieu of the invoice value to the seller. In such transactions the loaned amount becomes repayable in full on the invoice due date I.e. when the seller receives payment for the invoice from the purchaser.

Purchase Invoice Finance

In this kind of business finance, the purchaser of the goods approaches an NBFC to enable early payments for its sellers and vendors. The purchaser shares the approved invoices with the invoice factoring company, which then allows the sellers and vendors to pick and choose invoices for early payment. The factoring company charges a fixed fee for the service from the sellers and vendors who chose to avail purchase invoice finance.

Also Read: Difference between Supply Chain Finance and Trade Finance

If you are wondering where you can get quick supply chain finance through sales invoice and purchase invoice financing, visit Livfin.com,  India’s leading invoice finance provider, offering both small and large organizations to get their working capital in order.

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