What is "invoice financing" in supply chain finance?

Invoice financing is accurately described as a method where businesses borrow money against the amounts due from customers. This financial tool allows companies to access immediate cash flow by leveraging their outstanding invoices, essentially using the promise of future payments from customers as collateral.

This approach is particularly beneficial for businesses that may experience cash flow challenges due to delays in customer payments. By securing funds in advance, businesses can continue to operate smoothly, pay suppliers, cover operational costs, and reinvest in growth opportunities without waiting for the invoices to be paid.

Other options describe different facets of supply chain management. The process of reducing costs through negotiation with suppliers focuses on cost management rather than immediate cash flow. Managing supplier relationships involves maintaining ongoing partnerships and communication, which is essential but not directly related to financing. Forecasting future inventory needs pertains to inventory management and demand planning, which are critical but distinct from the concept of borrowing against receivables.