Seller Based Electronic Invoice Marketplaces – To Sell or Not To Sell? Part III

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This is our third post on seller based Electronic Invoice Marketplaces and looks at the parties and roles of an auction market.

Who are the parties to an Invoice Exchange and what are their Roles?

There are four major parties and sometimes five to an invoice auction model. The first of course is the Exchange itself, which acts as a platform and does not take any funding interest in the invoice itself. The role of the exchange is to make a market, and to provide an auction platform that controls both the bid process and the cash dominion and of course to make the rules of the game.

The sellers and buyers are obvious parties, and the seller now has opened up a private commercial transaction to outside investors. Due diligence needs to be done on both the seller as well as the transaction itself.

Finally, there are the investors who are eligible to bid on the auctions and must abide by the terms and conditions of the exchange.

Parties and Roles in an Invoice Auction Model

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For any receivable platform, there are key questions to ask:

  • How does the platform work?
  • What counterparty information is available on the seller to investors – and what due diligence needs to be done?
  • What is the risk mitigation model used by the exchange administrator? It is important to understand the cash dominion process and recourse treatment as examples.
  • What is the true sale accounting treatment?

If you are interested in a more detailed review on Electronic Invoice Marketplaces – To Sell or Not To Sell? and the players, please visit here.

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