Credit operations can be an ally for companies of all sizes, as they can help maintain stable financial health. Receivables anticipation is one way to access capital.

The operation can bring benefits to those who request it, but it also requires research to avoid financial problems. Therefore, it’s essential to understand how it works and when it’s beneficial to use this type of operation.

Want to learn more about receivables anticipation? Then keep reading to learn about its benefits and points to consider when applying for it!

What is receivables anticipation?

The idea behind receivables anticipation is to act as a line of credit that allows companies to advance the collection of their sales. This feature allows access to the capital from accounts receivable before the stipulated deadline.

Therefore, advances are offered to companies that work with installment payment methods, such as promissory notes, payment slips, and credit cards. In the process, the receivables are sold to an institution that will hold the rights to receive payments in the future.

To compensate the purchasing organization and mitigate the risks involved, a discount is applied to the total amount. This practice allows the company that sold the receivables to access the discounted amount.

A line of credit’s primary function is to support working capital. However, it’s important to determine in advance whether cash flow will be affected in the months following the request. Additionally, you need to identify the discount involved in the process.

When is it advantageous to apply for this line of credit?

Now that you understand what a receivables advance request is, it’s worth exploring the benefits associated with this option. By analyzing the terms and conditions of the institutions that offer this option, your company can safely take advantage of its benefits.

See below the most favorable situations for requesting the operation!

Access attractive rates

The rates for receivables advances are lower than those for loans, financing, or overdrafts. In other words, the interest on other transactions may be higher than the amount charged in the discount—making the advance advantageous.

This happens because the company requesting the advance is not borrowing money, but accessing its own resources that would be available in the future. Therefore, this modality presents lower risks for the lender than other credit operations, making it less costly.

Improve cash flow

Since prepaid receivables are amounts accessed ahead of schedule, the amount can be considered part of the month’s income. This mechanism can optimize cash flow during the period and represents another advantage of the prepayment service.

This allows the finance department to establish strategies that won’t compromise the company’s operations. Furthermore, with a positive cash flow, it’s possible to organize inventory purchases and plan other payments with greater peace of mind.

Increase working capital

Another advantage of anticipating receivables is the possibility for the company to expand its working capital, allowing the business to maintain its activities in a healthy manner.

By accessing the advance payment, financial management can take advantage of it to increase liquidity and make profitable investments. The increase also facilitates business expansion.

Meet seasonal demands

Seasonal circumstances are periods of the year when demand is much higher. This is the case during Christmas, Mother’s Day, and Children’s Day, among other holidays. Therefore, to meet high demand, it’s important to have an increase in business capital—enabled by advance receivables.

Resolve unforeseen events

While seasonal demands lead to increased sales and inventory, unforeseen events can have significant impacts on the business. These include reduced profits, increased bills, and disruptions to company planning.

Therefore, relying on receivables anticipation allows your business to access emergency funds, avoiding greater financial problems in the future. This solution contributes to financial health during downturns.

Negotiate discounts with suppliers

In addition to increasing cash flow and working capital and resolving seasonal and emergency situations, anticipating receivables can improve access to discounts. 

Having accessible funds strengthens the conditions for negotiating more attractive prices for your business. You also have the option of requesting flexible delivery times and other necessary requirements.

Reduce the chance of debt

Finally, advance receivables can also be requested to reduce the company’s chances of incurring debt. This option is attractive because the requested amount is already part of the company’s budget.

Thus, the money that will enter the cash flow is not part of the corresponding amount and does not increase the business’s debt level . As a result, the risk of future financial problems is also lower than it would be if management requested a traditional loan.

What precautions should I take before choosing this option?

So far, you’ve learned how receivables anticipation works and when it’s beneficial to request it. However, despite the positive aspects, you need to be aware of the terms each institution offers for the transaction.

The discount percentage and other conditions vary depending on the credit partner. Therefore, it’s essential to determine which alternative is most suitable, considering other credit options that may meet your company’s needs.
Additionally, it’s worth checking the reputation of the institution providing the advance, as well as the prerequisites that qualify it to offer the credit. Another important characteristic is the risks the partner assumes, such as default on a receivable.

Finally, remember that by anticipating receivables, the customer’s future payment flows will no longer be credited to the company. Therefore, it’s crucial to have effective financial control to avoid financial inconsistencies—which can lead to poor decisions and cash flow problems.

As you’ve seen throughout this article, receivables anticipation is an attractive line of credit for increasing cash flow and can be used at strategic times. To take advantage of its benefits, be sure to check the conditions for accessing the service.