GoCardless is using a link to Sage's accounting software to improve the experience of automating business-to-business payments in a market that typically lags the consumer payments market.
"Business-to-consumer gets all of the attention, and there are some really great companies out there like Stripe and Square doing innovative stuff," says Tom Blomfield, co-founder of GoCardless, a London-based online business payments processor. "Business-to-business payments has been less visible to payments entrepreneurs, but there is a huge market. There are still supply chains where the payments are being carried out the same way [as they have been] for years."
GoCardless's direct-debit plugin with Sage will launch on July 29. Sage's software handles inventory management, automated shipping and financial management tools for businesses. "Sage has a very large installed base," says Blomfield.
The GoCardless plugin for Sage enables the Sage 50 accounting software's business user to automatically bill and manage direct debit payments and deliver invoices, as well as track payments due and perform reconciliation.
"If you are a business you want to focus on your day job and not be focusing on chasing down late payments," says Blomfield. "The idea of having invoices flying around that someone has to rekey is insane."
About 40 businesses have tested the Sage plugin. Has Bean Coffee, a wholesale coffee supplier in the U.K., has reduced late payments by 30% by using a GoCardless integration with KashFlow, an online accounting system similar to Sage, GoCardless says. Has Bean Coffee did not provide an executive for an interview by press time.
Other businesses that have tested the Sage plugin are reporting results similar to Has Bean Coffee's performance, Blomfield says, though he would not name the other testers. GoCardless, which charges 1% per transaction with a limit of about $4, also integrates with accounting programs such as ClearBooks, Directli, Xero, Freeagent and Quickfile.
Other companies matching business to business payments with accounting tools include BillTrust and Bill.com, which integrates with QuickBooks products and Sage.
"Business-to-business technology is starting to catch up, but it still lags behind innovations in consumer payments technology," says Nancy Atkinson, a senior analyst for Aite Group, which just finished new research on business billing. "The complexity of the billing relationship is one reason for this. With consumers you are taking about sending a bill to the customer, and the customer pays it. With businesses, there are buyers and sellers and negotiations."
During March and April of 2013, Aite surveyed 60 receivables experts at U.S.-based middle-market companies, and found that the greatest percentage, 69%, reported difficulties because their back office systems did not support matching of electronic remittance and payment data.
Aite also found that in a typical situation, nearly 8 full-time employees investigate and process exceptions or discrepancies between the payment amount received and the amount their company invoiced.
In such a tech-challenged environment, GoCardless is smart to partner with a company such as Sage that supplies enterprise resource planning technology, Atkinson says, though she cautions GoCardless may face some challenges in attracting users, especially for recurring bills that can differ from month to month.
"The [direct debit] assumes the invoice is completely accurate and the goods that were delivered were exactly what was ordered and there were no quality issues or other factors involved," she says. "Even consumers were initially reluctant to sign up for direct debit for payments such as utilities."