How structured invoice data accelerates factoring

Source: PartnerHUB

Today, we did the next webinar together with Katalin Kauzli (Partner HUB) on the topic of e-invoicing. This time about its application in the factoring industry. And here is my summary of it.

Katalin is an ambassador of e-invoicing integrated into banking. We keep discussing the topic of e-invoicing from different aspects for several years.

As we all know, e-invoicing will become mandatory during the next 2-3 years in the biggest number of EU countries, and other countries outside the EU as well. What does it mean for the factoring industry? Is there good news for factoring companies? It definitely is!

When companies are obliged to exchange data in electronic structured data format, structured invoice data becomes available, and it can be used in the digital financing process. 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.)

Data from invoices and payment history provide powerful underwriting tools to lenders, allowing:

  • Verify the history of on-time payments
  • Validate SME sales and purchases
  • Analyze previous transactions with the buyer/supplier.
  • Select which invoices to pay

Factors can leverage invoice data if it is structured and standardized.

Here some subtopics Katalin presented talked about:

How can factors get access to invoice data?

  1. Embedded in the invoice. Invoice data can be retrieved from the e-invoice if it was issued in a hybrid format (data embedded into the pdf).
  2. From the issuing system. By integrating the factoring company’s software with the issuing system’s API, it will be possible to obtain invoice data from the system even if the issued invoice is not electronic or hybrid. Major invoice providers either provide a public API or allow for the request of API access for integration.
  3. From tax authority/Account Aggregators. In some countries in case of invoices that are not e-invoices, certain invoice data fields are required to be filed in tax returns. These invoice data generally can be retrieved from the tax authority for processing.


How factors can ensure that the e-invoice is not fake

In different countries, tax authorities introduced different e-invoicing regulations:

  • Clearance from Tax Authority. Ensuring invoice authenticity Clearance from tax authority E-signature Unique invoice identifier Different countries have different e-invoicing schemes, in some cases (Latin America, Italy), the tax authority approves the invoice before actually issuing it. Some tax authorities assign an invoice reference number or a hash code of receipt of data to the related invoice (these can also be used as unique invoice identifiers).
  • E-signature. In some countries, e-invoices must have an e-signature. E-signature providers are licensed actors. The e-signature can be checked and shows that the content of the invoice has not been changed/corrupted since invoice creation.
  • Unique Invoice Identifier. Each e-invoice has a unique identifier, which is assigned by the issuing system.


Invoice data in factoring process

Source: PartnerHUB


What is going to be next or already in the factoring industry?

  1. Onboarding
  • From separate to integrated or no onboarding at all for existing customers
  • From a paper-based to data-based
  • From sales based to event-based/contextual/embedded. The moment when a customer issued an invoice in the e-invoicing platform/system is the very right moment to offer them to finance that invoice. If to go a level up and use predictive analytics and offer SMEs invoice finance before they start having problems with liquidity and not after.

2. Financing transactions

  • Access to invoice data allows automated processing
  • Automated validations and checks

3. Risk modeling and pricing 

  • From standard to differentiated pricing
  • Relationship risk instead of counterparty risk (credits: Eva Degenhart)



For more details, watch the webinar recording: