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Benefits of ID for suppliers from the Pharma Industry

By Annapoorna

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Updated on: Oct 12th, 2022

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3 min read

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The pharmaceutical industry often deals with large invoices in terms of cash as well as the quantity of items sold. Sometimes, this results in unpaid invoices leading to huge amounts of funds being tied up. Instead of waiting for customers to pay, invoice financing lets vendors leverage their receivables to receive payment before the due date.

Relevance of invoice discounting in the pharmaceutical industry

Big pharma companies often issue large orders to suppliers and expect these orders to be fulfilled in a relatively short timeframe. However, the payment made to the suppliers is often delayed for significant periods, making life difficult for the suppliers.

The suppliers tend to face a cash crunch and often fall short in terms of the working capital requirements necessary to fulfil the next order.

Invoice financing is a great alternative in the pharma sector. Invoice discounting provides suppliers with a short-term solution that enables them to avoid facing any stopgaps in production. This is done through the leveraging of receivables in exchange for finances to meet short-term requirements and working capital needs.

Clear Invoice Discounting platform provides the apt solution for pharma companies with the promise of 60% plus vendor participation resulting in 2x discounted invoices and ability to discount invoices throughout the year!

Advantages of using invoice financing

  • Availability of short-term financing

The only collateral that needs to be provided here is the unpaid invoices. Once this is submitted on the invoice financing platform to the lending institution, the funds are released to the vendors after deducting the interest, thus allowing them to meet their working capital requirements.

  • Increased cash inflows

Pharma companies often order goods in bulk from the suppliers, resulting in invoices of large amounts. When these invoices are not paid on time, the suppliers tend to suffer.

The option of leveraging the outstanding invoices offers them a lifeline since that leads to a considerable increase in cash inflows.

  • Funding as per invoice value

Loans and overdraft facilities often have a limit that one can borrow up to. Here, the funds availed are dependent on the value of the invoice. The higher the value of the invoice, the higher the funds disbursed.

  • Reduction in bad debts

By opting for invoice financing, the suppliers are at liberty to allow the pharma companies some additional time to pay off their outstanding dues. Moreover, since the amount of unpaid invoices is paid to the suppliers at the time of opting for invoice financing, the level of bad debts incurred by the business is considerably reduced.

How can businesses in the pharmaceutical industry opt for invoice financing, and whom to approach?

A buyer in the pharma industry who wishes to opt for invoice financing may approach a lending institution such as a bank or any other financial institution.

Additionally, various invoice financing platforms allow the business to upload its bills on its platform along with the necessary details. Once this is done, the funds are then offered to the business at a percentage of the total outstanding value of the invoices submitted.

The funds are then collected from the debtor company by the finance provider. Once the debtor pays the entire outstanding invoice value, the balance amount of funds are then transferred to the business owner by the finance provider.

About the Author

I preach the words, “Learning never exhausts the mind.” An aspiring CA and a passionate content writer having 4+ years of hands-on experience in deciphering jargon in Indian GST, Income Tax, off late also into the much larger Indian finance ecosystem, I love curating content in various forms to the interest of tax professionals, and enterprises, both big and small. While not writing, you can catch me singing Shāstriya Sangeetha and tuning my violin ;). Read more

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