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Blockchain Enabled Invoice Discounting


Invoice Discounting is a funding option available to small businesses to tide over cashflow vagaries. Under the invoice discounting arrangement, the supplier (business) uses the account receivable as collateral to access instant funds to improve the cash flow position. Under this arrangement, each payment pending invoice can be used as a collateral and the funding raised against the invoice is directly proportional to the invoice amount, duration in which the payment shall become due and the credit worthiness of the buyer. Since the financer is providing instant cash against the future receivables, typically a discounted amount is provided as cash against the invoice amount, hence the name Invoice Discounting.

However, the current system of Invoice Discounting is highly manual and thus error prone and costly to implement. This translates into heavy discounts that are applied on the Invoice being funded. Another issue is fraudulent invoices that are abundant in the system and thus increase the risk of funding an invoice. The frequency of these duplicate/fraudulent invoices has significantly grown a lot. About 0.05% to 0.1% of the invoices used to avail invoice discounting are fraudulent.


Various challenges faced by Invoice Discounting Industry include:

  • Potential of Fraud – Currently only a random sample of invoices are verified against their paper trail, leaving scope for fraudulent invoices in the system.
  • Time-consuming process – Due to the tedious manual process of the transaction and lack of automation, there is no instantaneous way of approving invoices immediately.
  • Lack of tracking the invoice through the system - Currently the supplier, buyer and the financer cannot track the transaction in real-time. The status of the invoice process is only known if communication is shared.
  • Manual Documentation – The process relies heavily on manual steps from raising an invoice to submission of purchase orders and proof of delivery. This makes the process tedious; also the information is often lost in the process.
  • Financial institutions are not ready to disburse loans – Due to this massive amount of work involved and lack of transparency, many financial institutes prefer not to participate in Invoice Discounting.
  • Large Invoices Preferred - Mostly, large invoices which belong to well-established companies are taken as collateral. This is due to the massive amounts of work involved in checking the legitimacy of invoices received. This makes the cost of financing significantly higher for the small businesses.
  • Lack of Credit Scoring – Current implementations hardly maintain credit scoring of the participants. This makes decision making process much more difficult for the financers.

Our Solution

A decentralized solution, using Blockchain, provides participants with a seamless digital experience for easy processing of invoice discounting with suppliers, buyers, financial institutions and regulators. This will instill trust by checking the credit history of the various suppliers and it will help to take the decision of whether to disburse funds to the corresponding parties or not.

The solution is built using Hedera decentralized platform. It uses the Hedera Consensus Service and Hedera Token Service to enable the solution. If desired, instead of using token service for payment, integrations can be made using payment gateways to use fiat currencies.

Business Workflow

The workflow below depicts various steps and stakeholders involved in the invoice discounting process:


All the stakeholders, i.e. supplier, buyer and Financer must be registered on the system and validated before they can participate in the system. This ensures credibility of all the participants. Each participant can optionally be rated and each transaction contributes to the rating to build the credibility further.

  1. The Supplier uploads the invoice details on the system to create an Invoice and sends the invoice request to the buyer.
  2. The Buyer approves the invoice request, thus validating the invoice and promising to pay the invoice on its due date. The system tracks all invoice requests and their respective approval/rejection/dispute by the buyers. An approval would enhance rating of the supplier; while any rejection or dispute would bring it down.
  3. Supplier creates an invoice financing request on the approved invoice; thus opening the invoice for various financers to propose the financing against it.
  4. Financer(s) provide their proposals against the invoice financing request. Each proposal received against the invoice financing request further enhances the rating of the associated supplier and buyer.
  5. The supplier reviews and accepts one of the proposals based upon the financing conditions and amount. This automatically creates a contract between the supplier and the financer. Each proposal thus accepted enhances the rating of the associated financer.
  6. As per the contract terms, the supplier raises a payment request. If required, this step can be automated through smart contract.
  7. Financer reviews the payment request and releases the payment. Every successful payment further enhances the rating of the supplier.
    Steps 6 & 7 may be repeated if the contract involves part payments.
  8. At the appropriate time (as per invoice terms), the buyer releases the payment to the financer, which financer then accepts. Each payment thus accepted enhances the rating of the involved buyer as well as the supplier.
  9. Financer pays any remaining payment to the supplier. This completes the contract. Each successfully completed contract enhances the rating of all the parties involved.

The rating of each participant (supplier, buyer and financer) is used in subsequent transactions and would determine ease of getting finance or the rate (discount) at which finance is provided or acceptance of the financing proposal. Thus, all participants have incentive to keep their rating as high as possible.

The system also provides for regulator(s) and consortium to provide governance and auditing services for the process. For this, they can also access the system and access the required data after due approvals and access grant by the participants.

Stakeholder Participation

The diagram below depicts how various stakeholders take part in this decentralized network and utilize various services to enable a seamless implementation of invoice financing.



The Blockchain based system takes care of all the challenges associated with current, mostly manual, process by using Hedera Network for storing all transactions, to execute associated business rules and Hedera tokens to implement payments.

Here are the various ways through which Blockchain benefits invoice discounting.


Solution Screens

Listed below are key screens of Invoice Discounting Solution developed by Coforge with Hedera providing the backend platform. The solution used Hedera Consensus services and Hedera Token services.


Dashboard is provided as per role of the participant. Below is a sample dashboard for user with Supplier role. Dashboard provides visual view of key parameters that the role holder would need to track. The dashboard also provides view of the account ID of the user, HBARs (Hedera currency) and IGTs (token used by Invoice Discounting framework) that are associated with the account. IGTs are used for making/receiving payments. If desired, the solution can be integrated with payment system so that transactions in fiat currency can be accommodated.

Based upon the role of the logged in user, the Dashbaord screen would allow key action to be initiated. E.g. for the Supplier role, “Create Invoice Contract” action is enabled.


My Action List

The “My Action List” section lists all the invoices which requires some activity from the logged in user. User can review the action list and can initiate action from here.

Similarly, “Action Performed” section lists the invoices related to the logged in user, where there has been a change in state within last few days (i.e., # of days for which data is to be shown is configurable) .


Invoice Contracts

Invoice Contracts screen lists all invoices contracted by the role holder. The user can click invoice ID to view invoice details or can perform actions allowed as per lifecycle stage of the invoice.




Data Breaches

While the system performs any invoice state change transaction, it is verifies any mismatch between off-chain data and on-chain data. If a mismatch is detected, automatically a data breach record is created. Once the data breach is fixed and use clicks to reverify, it the record is marked as resolved. Only after the breach is resolved by the user any operation can be performed on that invoice.



This page lists all the transactions which are recorded as part of invoice state change activities. On clicking the transaction id one can get an insight of the transaction on Hedera’s portal.


Financer Proposal Request

This screen lists the parameters required to be provided by the Financer while creating a proposal for an invoice financing request.


Financer Final Payment

This screen lists the parameters required to be provided by the Financer while releasing the last payment to the supplier.


Coforge Advantage

We help you transform at the intersect of unparalleled domain expertise and cutting-edge technologies to achieve real-world business impact. Coforge’s dedicated Blockchain studio provides resources needed to quickly build on Hedera, r3 Corda, Hyperledger Fabric, Ethereum and Polygon platform-based applications. Our assets simplify the formation, management, and governance of Blockchain networks to support suppliers to gain the trust among the financial institutions by sharing their credit history of the various transactions performed by them on the network. Our solution can easily integrate with backend systems to build a complete end-to-end process. A secure application and a dashboard view empowers both the suppliers, financers and buyers with information on which they can act. The solution accelerator gives you a head start for building an invoice financing use case on Blockchain tailored to your requirements. Our proven capabilities in Blockchain across Industries, combined with the rich experience enables in bringing advanced methods, products, solutions and approaches that offered significant value.

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