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How technology can improve Invoice Discounting efficiency

Thu 06 Dec 2018

Andrea Tanner, Client Director, Equiniti Riskfactor, discusses how Invoice Discounting facilities can be more efficient for the lender and easier for the customer.

In comparison to traditional factoring facilities, Invoice Discounting is often regarded as more cost effective for the customer, and more efficient for the lender.

Invoices are uploaded as bulk totals only, the customer runs their own sales ledger, with a reconciliation completed at month end.

However, for lenders the frustration with this method is there are still a number of manual and time consuming processes involved, but opportunities do exist for better systems.

How new technology can improve outdated processes

The monthly calculation of sales ledger reserves is a key process that is often labour intensive and error-prone. Despite being a critical risk management procedure, without expensive, experienced and fully resourced teams, back-logs occur, errors are made, and customer complaints arise.

This monthly process can be a significant weakness in the overall control framework – yet by harnessing available technologies, many of these risks can be avoided.

Increasingly, lenders are exploring the opportunities data extraction tools offer in automating the exchange of information from customers’ account systems. While this is useful for swift analysis of financial performance and credit approval of new facilities, there are also significant benefits available to Invoice Finance lenders.

Tools are already available that will automatically calculate reserves for aged debt, credit limits, concentration percentages or any other criteria the lender configures, such as excluded accounts, “contra” positions or export restrictions.

In addition, automated analysis can provide an “item level” view of the customers’ sales ledger. Unusual items can be highlighted, for example, new accounts or high value, round-sum or re-aged invoices.

Key Benefits of extraction technology

  • Automation makes the process faster and more accurate for lenders.
  • Detailed reports on newly calculated reserves can be shared with customers.
  • A risk-based approach to oversight and approval can be adopted, freeing up management time.
  • The metrics drawn from the process can produce enhanced risk analysis based on item level data.
  • Speed up on-boarding.

While the above improves efficiency and customer experience, the same technology can also be used to speed up new customer acquisition.

Using the same technology, a potential customer’s sales ledger can be quickly analysed, to show the ageing, top 10 debtors, concentrations, debt turn and dilutions. This allows a quick decision on proceeding and can give the prospect an illustration of funding available – an immensely powerful sales tool.

Increase your pool of customers

With item level analysis of the sales ledger, the door opens for a wider range of Invoice Discounting customers, customers who may otherwise only be considered for a factoring facility. In addition to increasing customer satisfaction and retention rates, these systems also improve efficiency, reduce fraud and create capacity for growth.

To find out more about improving Invoice Discounting processes please contact Andrea Tanner, Client Director on or call 01444 19 460 and discuss your risk management needs. Andrea has over twenty years of experience working in banking and dealing with risk management. Take advantage of her expertise and book a short demonstration of EQ Riskfactor.

For more information read our brochure on Invoice Discounting Analysis