Information systems
A factoring company cannot operate for very long in today’s market without a computerised information system. The benefits outweigh any initial concerns as to the cost of such a system. Many sellers have themselves sophisticated computerised systems and, in fact, even the smallest businesses will usually have their own PC and at least a computerised accounting package.
It is necessary to provide reports to your sellers on the status of their accounts, which is only possible with a computerised system. A computerised system will speed up the processing and maintenance of the accounts you maintain. The latest technology is also built to reduce human error. A good information system will provide you with a competitive edge.
Off the shelf systems
An Off the Shelf System buys in the expertise needed to develop and implement a factoring system. Off the Shelf Systems have usually been developed by software companies in partnership with large factoring organisations. As a result, they should cover all of the main requirements of a factoring company.
Although the expertise required to develop and implement the factoring system is with the software company, you will still need the IT expertise to provide some support, to ensure the system is integrated effectively with any other software packages you operate, and to enable an informed assessment of the packages available.
Own development
A self-developed system gives you control over every aspect of your system from development through to future enhancements. There are many advantages to this approach although the disadvantages should also be considered carefully.
Main features of a proper IT System
The main features of a factoring information system are detailed below. These are the features of a basic system. Other processes can be operated using alternative means, although an all-inclusive system should be considered. An all-inclusive system will avoid any problems associated with integrating different operating systems and will make control and management reports easier to produce.
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Invoice processing;
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Collection process;
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Allocation of buyer payment;
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Finance to sellers;
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Credit cover management;
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Buyer and seller risk assessment;
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Control and management reports;
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Integration with the General Ledger.
You can find extensive information on this topic (including a list of major vendors and negotiating tips) in Part Three of the Guide to the Establishment of a Factoring Operation.