Factoring Businesses Scale Up With Cloud Enterprise Resource Planning
Overview
By combining NetSuite’s leading cloud enterprise resource planning (ERP) system with capabilities designed for their industry, factoring companies can more effectively manage their transaction loads, grow, and take on new business.
When businesses need immediate access to cash, one option is to work with a factoring company. For a fee of 1% to 10%, the factoring company pays cash for a business’ accounts receivable assets. Because the factoring company takes over the invoice and collection process, businesses get cash upfront versus waiting 30-90 days for their customers to pay.
Factoring companies acquire their clients’ unpaid invoices at a discount and also assume the risk of late or non-payments. For cash-strapped businesses, going this route can help address cash flow problems.
Managing on Disparate and Homegrown Software Systems
The US factoring services market was valued at $153.96 billion in 2022 compared with $147.40 billion the previous year. Over the next eight years, the market is expected to post a compound annual growth rate (CAGR) of 8.1 percent.1 Companies operating in this growing sector often handle very high transaction volumes and work on extremely short approval and disbursement times.
For example, a client that submits an open invoice in exchange for payment usually expects to get paid same-day or next-day. To manage these demands across thousands or even hundreds of thousands of invoices per week, factoring companies combine systems like QuickBooks for financial management, FactorFox for invoice management, and Excel spreadsheets for transferring data across their disconnected systems.
“These companies operate in a sector where volume is high and turnaround times are extremely tight,” said Emile Le Saux-Racette, NetSuite solution architect at Bryant Park Consulting, a NetSuite Alliance Partner. “Yet we continue to see a lot of disparate systems that require additional headcount to perform the extraction of the data.”
Some larger factoring companies are using homegrown factoring software comprised of Microsoft databases and proprietary software architecture. The latter is a homegrown set of software—sometimes integrated, sometimes not—that a company develops for its own operating purposes. There are advantages and disadvantages to this IT strategy.
“One of the main benefits that factoring businesses get from NetSuite is the ‘SuiteFactoring’ set of records and intellectual property that Bryant Park is developing. SuiteFactoring gives companies one ERP system that they can then use to do everything, from operations and accounting to financials and reporting.”
Emile Le Saux-Racette, NetSuite Solution Architect, Bryant Park Consulting
It’s a dramatic improvement. “NetSuite operates on vendor and customer transactions, so linking accounts payable and receivables—the very core of a factoring company’s business model—is a base functionality for the ERP,” said Le Saux-Racette. “Using NetSuite’s native functionalities as a foundation, we then extend the ERP’s capabilities to help factoring companies grow and scale on a single system.”