About the Invoice Discounting Calculator
What is the Invoice Discounting Calculator?
Invoice discounting lets a business receive most of an invoice's value now instead of waiting for the buyer to pay. MSMEs in India can do this on RBI-regulated TReDS platforms, where banks bid to finance invoices of large buyers.
Enter the invoice value, advance rate, discount rate, days until payment and fees to see the cash received and the true annual cost.
How to use the Invoice Discounting Calculator
- Invoice Value (₹) (sample: 10,00,000)
- Advance Rate (% of invoice) (sample: 90)
- Discount Rate (% per year) (sample: 11)
- Days until the Buyer Pays (sample: 60)
- Processing / Platform Fee (% of invoice, plus 18% GST) (sample: 0.25)
- Press Calculate Invoice Discounting Cost (results also refresh as you type). The result card shows the Amount Received Upfront, along with Discount (interest) charge, Fees incl. GST, Balance paid when the buyer settles and Total cost as % of invoice.
Formula used
Upfront amount = Invoice × Advance % − Advance × Rate × Days ÷ 365 − Fees × 1.18
- Effective annual cost = total cost ÷ upfront amount × 365 ÷ days
On TReDS, financing is usually without recourse to the MSME seller.
Worked example
These are the sample values already filled in the calculator above, and the result it returns for them:
| Input | Sample value |
|---|---|
| Invoice Value (₹) | 10,00,000 |
| Advance Rate (% of invoice) | 90 |
| Discount Rate (% per year) | 11 |
| Days until the Buyer Pays | 60 |
| Processing / Platform Fee (% of invoice, plus 18% GST) | 0.25 |
| Result | Value |
|---|---|
| Amount Received Upfront | ₹8,80,776 |
| Discount (interest) charge | ₹16,274 |
| Fees incl. GST | ₹2,950 |
| Balance paid when the buyer settles | ₹1,00,000 |
| Total cost as % of invoice | 1.92% |
| Effective annual cost | 13.28% |
Tips for using the Invoice Discounting Calculator
- Compare the effective annual cost with your cash-credit or overdraft rate.
- Invoices of highly rated buyers get lower discount rates.