FinTech Tackles The Human Error Challenge Of Late B2B Payments

While the late payments debate is louder in some markets than others, it’s a universal challenge among businesses — particularly small vendors — that struggle to be paid within a reasonable amount of time from their large corporate customers.

The conversation often orbits the idea that some firms intentionally, sometimes even maliciously, force longer payment terms of vendors or withhold payment to suppliers in favor of their own working capital needs. But delayed and late payments can be traced back to a variety of factors, said Chad Hardy, chief operations officer at Australia FinTech Bookipi.

As he told PYMNTS, micro-businesses and solopreneurs can face particularly difficult hardships when it comes to getting paid on time. Making things easy for the client can ultimately be the most effective strategy at boosting a young business’s cash flow, he said.

Errors And Inconvenience

Australia is quickly emerging as a world leader in the fight against late payments. Government initiatives to encourage prompt invoice payments are helping to increase awareness of the issue at a time when small businesses need financial support the most.

“Too many small businesses are closing their doors because they aren’t getting the income they need to survive,” said Hardy.

While there is evidence that larger corporates in the country, like other markets, deliberately delay payment to suppliers, most often the culprit behind payment delays can be traced back to friction within the invoicing and invoice payment workflow itself.

Australia, unlike the U.S., has largely phased out paper checks, and while cash remains commonplace, accelerating digitization means electronic payments are quickly becoming the norm, according to Hardy.

But today, bank transfers tend to be the most popular invoice payment method, and it’s a tool that can, unfortunately, contribute to the late payment problem. Manually entering in payment details and bank account numbers, as well as having to use siloed and external payment solutions in order to pay an invoice, are two key drivers behind late payments as they leave plenty of room for error or dropoff, Hardy said.

These issues highlight how multifaceted the late payments issue can be, considering the many reasons behind a missed payment.

“Most people don’t intentionally avoid paying invoices,” Hardy noted, adding that there are three main reasons for late B2B invoice payments: “One, the merchant forgets to include important information on their invoice; two, a mistake is made, and the wrong information is entered by the payor; or three, the payor just plain forgets to make the payment.”

Speeding Things Along

Automated invoicing solutions have entered the market in recent years in an effort to address these issues through integrated payments functionality and automated payment reminders, but for the smallest of businesses and solopreneurs, the software has typically been priced out of reach or designed for financial experts and not business owners, said Hardy.

That’s the gap in the market that Bookipi aims to fill with a recently announced collaboration with Fat Zebra. Together, the companies rolled out Bookipi’s invoice payments solution BookiPay, allowing clients to pay invoices via card through a link on the invoice.

Card payment acceptance is increasingly important, Hardy noted.

“As a small business owner, you want to make things easy for your clients, which is why we’re seeing so many small businesses moving to card payments for invoices,” he said.

In addition to growing acceptance of cards, government efforts like the government’s push toward electronic invoicing, requiring larger firms to make public their supplier payment practices, and the development of the nation’s real-time payments rail, New Payments Platform (NPP), are all helping to encourage a prompt payment environment.

“These initiatives give small businesses greater transparency regarding their payments,” Hardy said. “Small businesses need consistent cash flow, and these initiatives help them get it.”