Late payments to small businesses from their corporate buyers are an issue the world over. Now, FinTech giant PayPal is entering the ring to combat late payments and has picked a certain market to do so.
Reports on Monday (Sept. 12) said PayPal Australia will be looking to shorten the time it takes for small businesses in Australia and New Zealand to get paid — at present, that timeline stands at 26.4 days, according to reports.
“It creates a ripple effect; I’m waiting on the cash from a payment so I can pay you, and it’s this constant ongoing problem,” said Brian McDonnell, director of channel partnerships and marketplace at PayPal Australia, in an interview with ZDNet. The executive cited Irish companies, which pay their suppliers on-time, and Japanese companies, who pay an average of 6.5 days early.
McDonnell also cited one particularly troubling case in which a small business owner had been waiting 742 days — more than two years — to see invoices settled from one client.
“One day, he decided it was enough, and he decided to post something to this effect on his social media accounts: ‘To all my customers, I know you need help from me today and I know I should be there for you, but I can’t because I’m camped outside of this business that owes me outstanding funds and I’m going to stay camped outside of this business until I get paid,'” McDonnell told the outlet. “He got paid. They made a lump sum payment that afternoon and then set a schedule to pay the balance.”
McDonnell told ZDNet that, while that case is an extreme one, late payments trouble many SMEs in Australia, which is why PayPal chose to work with small business accounting firm Xero.
“With Xero, we believe we’re on the path to solving that problem [of late payments],” he said. “It’s a cash pump, and I call the cash pump the heart of the business.”
According to reports, PayPal has processed $140 million in B2B transactions through its integration with Xero, announced earlier this year, which enables small business users to pay invoices via PayPal straight from the Xero portal.