Purchase order funding
You are funding production against a document, and the goods have not been made yet.
Two qualifications, because this search collects the wrong people. This is not procurement software and it does not help a company issue or approve its own purchase orders. It is also not for a business seeking purchase order finance. It is the operating platform for the institution putting up the money: the purchase order funder, the trade finance desk, the factor whose clients keep bringing orders they cannot fill.
The exposure in this product does not behave like a receivable, and pretending otherwise is how it gets mispriced and under monitored.
Transaction POF-1187 · Larkspur Housewares · end buyer Tolliver Retail
Committed $412,000 · disbursed $164,800
- Evidenced
Deposit disbursed
40% to supplier, released by M. Chen under four eyes
- Evidenced
Materials procured
Supplier declaration on file, dated 11 days ago
- Slipped
Production complete
Slipped twice. No document behind either date
- Outstanding
Inspection passed
Outstanding. Third party certificate not received
- At risk
Bill of lading
Not received. Latest shipment date under the credit: 9 days
Expected takeout · invoice to Tolliver Retail · $524,000 · not yet raised
Why this is different
A receivable exists. A purchase order is a promise about the future.
Every operational habit built around receivables quietly misleads you here, because the collateral is not yet in existence and the aging clock has not started.
The instruments
Letters of credit and supplier guarantees are not paperwork. They are the deal.
How you pay the supplier determines what you can recover when the transaction goes wrong, so the instrument is recorded as a fact about the transaction rather than as an attachment somebody filed.
A letter of credit carries its issuing bank, its beneficiary, its amount, its expiry, its latest shipment date and the documents it requires for presentation. Those dates are monitored the way covenant dates are monitored, because an expiry that passes unnoticed converts a controlled exposure into an unsecured one on a Friday afternoon.
A supplier guarantee or performance bond carries the obligor standing behind performance and what triggers a call. If that obligor is also an obligor elsewhere on your book, the platform aggregates it, because credit support from a party you are already exposed to is less support than it appears on the page.
Direct supplier payment carries the strictest controls in the platform, and the reason is unsentimental. It is the point at which your money leaves the building on the strength of somebody else’s assurance that goods will follow.
Where the money actually goes wrong
The catastrophic loss in purchase order funding is rarely a buyer who refuses to pay. It is money that reached a supplier who never shipped, or shipped something the buyer rejected.
So the platform treats supplier payment as the highest control point in the product. Bank account changes are held for a human, duplicate and near duplicate supporting documents are detected across the whole portfolio, and every release carries the actor, the evidence and the policy version into an audit record that cannot be mutated.
The transaction
From an order accepted to a receivable taken out.
Six stages, each with its own evidence and its own way of failing.
- Assessment
Three parties are underwritten, not one
The client can fulfil or cannot. The supplier can produce or cannot. The end buyer can pay or cannot, and their credit is what ultimately repays you. Continuous underwriting runs on every material event and reports confidence and coverage separately, so a transaction resting on a buyer you know little about is visibly that rather than quietly that.
- Structure
Cost, margin, instrument and the takeout are agreed before a cent moves
The funded cost, the expected invoice value, the gross margin the transaction depends on and how the receivable will be taken out are recorded together. A transaction whose margin cannot absorb its own fees is an argument to have at structuring, not at settlement.
- Issue
The instrument is issued and its dates enter monitoring
Letter of credit expiry, latest shipment date, presentation window and required documents are tracked with the same discipline as a covenant date. Approaching dates reach the responsible person's briefing while there is still time to amend rather than after the window closes.
- Production
Milestones are recorded against evidence, not against reassurance
Deposit paid, materials procured, production complete, inspection passed, goods released for shipment. Each milestone names the document that evidences it. An outstanding milestone reads outstanding and names what is missing, and a milestone that has slipped twice is a signal in its own right.
- Shipment
Documents arrive and the exposure begins to change shape
Bill of lading, packing list, inspection certificate and commercial invoice are extracted under a strict schema, revalidated in ordinary code and matched against the order. Duplicates and near duplicates are detected within the client and across the portfolio, because the same bill of lading financed twice is a known way this product is defrauded.
- Conversion
Invoice raised, receivable created, transaction taken out
The invoice is linked to the order that financed it, the disbursed cost is settled from the advance against the new receivable, and the remaining exposure moves onto the buyer's payment terms. A partial shipment splits the transaction rather than confusing it: part converts, the rest keeps its milestones.
For the funder
What the desk gets, beyond the transaction record.
Chain exposure
Purchase order, shipment, invoice and receivable as one linked object, so exposure is never double counted and never lost at the handover.
Buyer aggregation
One end buyer, every client and every transaction resting on them, one figure. Concentration in this product hides across transactions rather than inside one.
Release control
Payment files for the rails your bank accepts, with release control in front of them and the delivery wall stopping a test from reaching a real supplier.
Evidence at run time
Verification runs capture what they saw when they ran and are never re fetched, so a decision can be reviewed against the facts as they stood.
Officer briefings
Six fixed questions answered against your own responsibility, including what changed since the last brief and what requires a decision now.
Sealed packets
Audit packets sealed for the period they describe, with a database trigger refusing mutation, for the transaction that ends up in a recovery conversation.
The risk register
Six ways the transaction fails, and what the platform does about each.
None of these are hypothetical. Every purchase order funder has a file for each.
| What goes wrong | How it shows up first | What FactorFox does |
|---|---|---|
| The goods never ship | A production milestone slips, then slips again, with no document behind either date | Milestones hold their evidence and their history. Repeated slippage on one transaction or one supplier raises a signal rather than accumulating in an inbox |
| The supplier is paid and disappears | New bank details arrive shortly before a large disbursement | Bank account changes are held for a named human. The machine may stop the payment and may never release it, and four eyes applies to the release |
| The buyer rejects the goods | An inspection certificate is missing or an inspection fails before shipment | Inspection sits as its own milestone with its own document, so shipment against a failed or absent inspection is an exception with a name on it |
| The letter of credit expires | A date passes while everybody is watching production | Instrument dates are monitored like covenant dates and reach the responsible person's briefing ahead of the deadline |
| The margin evaporates | Cost overruns, additional shipments and fees consume the spread the deal rested on | Committed, disbursed and expected takeout are held per transaction, so erosion is visible against the original structure rather than at settlement |
| The same document funds twice | A purchase order or bill of lading reappears under a different client | Duplicate and near duplicate detection runs within the client and across the whole portfolio, not only against that client's own history |
Straight answers
What a purchase order desk asks first
Is this a purchase order management or procurement system?
No. Procurement tools help a company issue and approve its own purchase orders and control its own spend. This is a lending platform. The purchase order here is somebody else's document, used as the basis for advancing money to a supplier so goods can be produced and shipped. If your problem is approving internal requisitions, the tools you are looking for are a different category entirely and we are not one of them.
How is exposure held before there is an invoice to hold it against?
As a transaction rather than a receivable. A funded purchase order carries the committed amount, the amounts actually disbursed to suppliers, the instruments issued on its behalf, the milestones reached and the expected takeout, and it ages against expected shipment rather than against invoice terms. Aging against a due date that does not yet exist is how PO exposure becomes invisible in systems built for receivables.
What happens at the conversion into a receivable?
The invoice raised on shipment is linked to the purchase order that financed it, and the funded cost is taken out of the transaction and settled against the advance on the new receivable. The platform holds the chain as one object so the exposure is never counted twice and never disappears in the handover. Where the same institution provides the factoring line that takes out the purchase order, both sides sit on the same book and the takeout is a movement rather than a reconciliation.
Can it handle a partial shipment?
That is the ordinary case in this product and it is the case that breaks spreadsheets. A partial shipment converts part of the transaction into a receivable while the rest of it remains a production exposure, with the disbursed cost apportioned across both. The remaining balance keeps its own milestones and its own expected shipment date, and the invoiced portion enters aging on the buyer's terms.
Do you verify that the goods actually exist?
The platform organises and holds the evidence others produce: inspection certificates, bills of lading, packing lists, warehouse receipts and third party confirmations, each captured at the moment it arrived. It does not assert a fact it cannot prove. Where a document has not arrived, the milestone reads outstanding and names what is missing rather than passing on the strength of an expectation. The judgement about whether the evidence is sufficient stays with your officer.
What controls sit around the supplier payment itself?
Supplier payments are where this product loses money, so the strictest controls in the platform apply to them. Bank account details for a supplier sit under a human only hold: the machine may stop the payment, and only a named person may release it. Four eyes applies by default, and in solo mode an AI counter review is recorded in the second officer's place and refuses outright if any underlying fact has changed since the request was raised. Every release records the actor, the evidence and the policy version.
Related
Bring a transaction that went wrong.
We will model it against a demonstration book, from supplier disbursement through the milestones to the takeout, and show you where the platform would have stopped and asked for a name.