Pre-financing is a financing system in which the beneficiary receives funds from the non-repayable financial contribution based on submitted unpaid invoices, even before paying them to the supplier itself. After receiving the payment from the provider, the beneficiary is obliged to pay the invoices without delay and then submit a settlement of the pre-financing together with proof of payment. This system significantly saves cash flow and is used mainly by public administration entities, municipalities, higher territorial units and non-profit organisations; businesses are generally only allowed reimbursement or a combination of systems. Pre-financing not settled within the set deadline is considered a breach of financial discipline, and the funds must be returned. Correctly timing pre-financing requests against invoice due dates is one of the key skills of a project financial manager.
See also: Advance payment.
