Moving on to the topic of technology requirements, our survey investigated the current and future capabilities of systems support and performance. Critical to any factoring and invoice discounting business is the ability to understand how well invoice payment is performing, down to the level of each individual invoice (so that rapid remedial action can be taken where necessary). 31% of the industry is thought to have real-time information systems that give a completely up-to-theminute view of debt collection. 56% have the facility to view this data on a daily updated basis, while only 13% report payment performance on a weekly basis. However, these statistics do not give a real insight to the extent of how automated these viewing facilities are. Updates could be occurring in real-time, but may only be obtained by looking through a networked spreadsheet.
There is evidently an appetite in the industry to take on board increasingly sophisticated technology support to improve business effectiveness and efficiency. Respondents felt that 59% of the industry is currently using technology to report invoice level payment performance data, a proportion which is expected to rise to 83% in two years time. Our next question revealed what the nature and capability of that technology was likely to be.
When asked what principal advantages technology investment would provide over the next two years, we received two main views. The majority of respondents (77%) cited the notion of better risk management, in particular the ability to receive early, pro-active alerts in order to predict impending bad debt or spot possible fraud. This reflects concerns described by BCR Publishing in its regular reports on the industry:
“Cases of fraud are still on the up.There are a number of reasons for this; firstly more companies are using invoice discounting, a service more commonly used in fraud; secondly, increased competition means that factors may be responding to the race to sign up new customers by cutting back on due diligence and underwriting more marginal business, although there is little evidence to support this view.”
The remaining 23% of respondents said that they were looking to technology to deliver greater efficiency, lower cost of doing business and compressed payment cycles. In other words, the larger group is seeking technology to assist them extend their ability to take on clients and do business with them, whereas the smaller (but no less important) proportion are seeking to focus on improving profitability from their current market share.
In all events, the technological capability required by the majority already exists in the capital markets, and is known as exception management. However, this is not sufficient for the growing invoice discounters who will require the facility to view transactions and obtain aggregated reports. Most transactions pass straight through the business process without a hitch. The problem (or potential problem) transactions however, are those which demand speedy resolution as they could potentially end up costing significant amounts of money. It is therefore apparent that the key technological capability the industry is seeking, is the ability to automatically spot and escalate the first signs of impending bad debt or fraud.