Factoring and confirming: accounts receivable and payable

Confirming factoring offers solutions for companies seeking to improve their cash flow and simplify their financial operations.

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In the business environment, financial services are often used that allow the optimization of liquidity and the efficient management of accounts receivable and payable. Specifically, we can talk about factoring and confirming, two practices that offer solutions for companies seeking to improve their cash flow and simplify their financial operations.  

Factoring allows companies to obtain immediate liquidity by selling their invoices receivable to a third party, while confirming manages payments to suppliers, ensuring that accounts payable are fulfilled in a timely manner. In this post, we discuss the main distinctions between factoring and confirming, as well as their advantages and disadvantages. Keep reading!  

First, let’s understand what factoring and confirming is. 

As we mentioned, factoring is a financial tool through which companies can obtain immediate liquidity by selling their accounts receivable to a financial institution or a factoring company. This transaction provides companies with rapid financial resources and reduces the risk of non-payment by transferring collection responsibility to third parties specialized in credit management. 

On the other hand, confirming is an increasingly common practice in the business field, especially in the management of accounts payable. Through confirming, companies can outsource the administration of their payments to suppliers through a financial institution. This service offers benefits for both the company and its suppliers, as it streamlines payment processes, provides financing options for suppliers, and improves business relationships. 

What characterizes factoring and confirming? 

The main distinction between factoring and confirming is that they operate in different areas of business management. These are the elements that characterize each service: 


  • It involves the sale of a company’s accounts receivable. 
  • The company assigns its unpaid invoices to the factoring entity in exchange for receiving an immediate amount of money, generally a portion of the total value of the invoices. 
  • The factoring entity assumes the risk of collecting these invoices, so it is responsible for collecting them directly from clients. 
  • It can be with or without recourse. In non-recourse factoring, the factoring entity assumes the risk of non-payment entirely, while in recourse factoring, the selling company remains responsible if customers do not pay. 


  • It is a financial service in which a company hires a financial entity to manage its accounts payable
  • The company issues its payment orders through confirming, and the financial institution is responsible for managing these payments to suppliers. 
  • Suppliers have the option of receiving payment in advance from the financial institution, in exchange for accepting certain conditions, such as discounts for early payment or interest rates. 
  • Confirming helps companies optimize their treasury management and improve relationships with their suppliers. 

The advantages of factoring vs. the advantages of confirming 

If you’ve made it this far, you’ve probably identified some advantages of factoring and confirming. Specifically, the benefits of factoring include:  

  • Obtaining immediate liquidity: Factoring allows companies to convert their accounts receivable into cash quickly, providing immediate liquidity to meet urgent financial needs or invest in growth opportunities. 
  • Transfer of collection risk: By selling accounts receivable to a factoring entity, the company transfers the collection risk of those invoices. This frees the company from the burden of managing and collecting outstanding debts, thereby reducing the risk of non-payment and improving its cash flow. 
  • Improving working capital: Factoring can help improve a company’s working capital by freeing up funds that would otherwise be tied up in outstanding accounts receivable. 

On the other hand, the advantages of confirming are: 

  • Optimization of payment management: allows companies to outsource the management of their accounts payable, which helps them automate and streamline supplier payment processes. This reduces administrative burden and improves operational efficiency. 
  • Improving relationships with suppliers: By offering financing options to suppliers, such as early payment of invoices through confirming, companies can strengthen their business relationships and negotiate more favorable conditions, such as early payment discounts or preferential prices. 
  • Facilitating financial planning: Provides greater visibility and control over outbound cash flows by centralizing payment management. This helps companies better plan and manage their financial resources. 

Disadvantages of factoring and confirming 

Finally, it is important to also know the drawbacks of factoring and confirming, so you can make informed decisions. In this sense, you should know that factoring has high costs, which include commissions and interest rates, and can reduce the company’s profit margins.  

Additionally, dependence on third parties for accounts receivable management can affect the relationship with customers and the company’s perception of control over its own collection processes. Likewise, the frequent use of factoring could be seen as a sign of cash flow problems, which negatively affects the company’s credit perception. 

On the other hand, additional costs of confirming, such as commissions and interest rates for advance payments, can increase financial expenses. The administrative complexity involved in implementing confirming may require changes to internal processes and staff training, which adds an additional burden to the company. Furthermore, delegating payment management to a financial institution can lead to a loss of control over payment terms and conditions to suppliers. 

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