In a fully digital factoring process both the factoring process and the data and data access used in the factoring process becoming digital. Both are important for a full digitalization. Factoring companies have been working on process digitalization, such as digital onboarding and digital document management. However, in many cases the data sources used in the process could not be digitalized, because of the lack of standardized structured invoice and contract data.
With B2G or B2B e-invoicing or continuous transaction controls from tax authority being introduced in several countries, invoice data and related document metadata, such as contracts or certificate of performance can be made available for processing. The availability of structured data provides room for additional digitalization and automation of the factoring process.
Significance of invoice data for factoring
Invoice data contains the widest structured data throughout the purchase-to-pay/order-to-cash process: both payments and financing can be concluded using invoice data.
The datasets generated during an economic transaction can be summarized as shown below:
If structured invoice data is available then it can be used throughout the digital financing process, as it has all data that is necessary for invoice factoring, such as:
1. Supplier and buyer data
2. Invoice amount
3. Payment terms
4. Payment means (necessary bank account number, etc.)
Additional documents necessary for the factoring process
To complete a factoring process further documents are/can be necessary in addition to the invoices and invoice data:
- Signed contract for the transaction
- Certificate of performance (proof of accepting the performance of the supplier)
- Certain financial data of the enterprise (historical P&L, balance sheets, general ledgers,outstanding receivables and suppliers)
Some of these documents and lists can also be managed in a fully digital format as it is shown below:
As a consequence of managing all data in the financing process digitally the financing process can also be “digital only”.
How can a factoring company have access to structured invoice data?
If companies are obliged to issue e-invoices or are subject to continuous transaction control from the tax authorities then these companies’ software providers must have invoice in an XML/JSON format, therefore the invoices are available in a standardized structured data format. Therefore, if the companies give access to their invoice data for the factoring company, then data of these invoices can be used for the financing process.
If companies are not obliged to issue e-invoices/provide invoice data for continuous transaction control then invoice data can be shared with the factoring system via APIs by integrating with online invoicing service providers or ERP systems. In specific markets individual assessment is necessary which online invoicing service providers or ERP systems to integrate with.
If a factoring company has a huge micro enterprise customer base, then in certain cases it can make sense to provide an online invoicing solution by the factoring company itself. In this way the access to invoice data can be ensured because it is already in the system and can be shared with the factoring system via APIs with an internal integration.
