To cut late B2B payments, one firm aims to automate them from the start
Payments platform BizPayO is launching an online cash flow tool it says will help small and medium-size business owners tackle what amounts to a $3 trillion late-payment problem annually that undermines operations.
The Cash Flow Optimization Platform allows business owners to take payments online, building in "milestone" events in a project proposal as a way of scheduling automatic payments. The buyer can choose the payment method, including ACH or cards, with a surcharge that BizPayO builds into the platform to help businesses cover interchange fees.
The idea, however, is for buyers to choose noncard options and sign off on making the payments at the agreed-upon times through a click on a notification sent by the business owner.
"Payments represent the most powerful tool a business owner can leverage," said BizPayO founder and CEO Allan Ratafia. "A huge part of our mission is to not only get merchants paid, but paid in a timely manner and also recovering the third-party processing costs to interchange."
It's a significant change for business owners who have been handling payments the same way for years, well before any technology was available to change those habits, Ratafia said.
"It is irritating how many business owners just adopt the old-school methods of just taking risks in how they get paid," Ratafia added. "They take a payment upfront at the start of a project and just hope to collect the rest when the job is done."
Even in an era of electronic payments becoming more mainstream, collecting payments remains a challenging task for some small-business owners, said Gil Luria, director of research for equity capital markets at D.A. Davidson & Co.
"Not only are there still some check payers out there, the proliferation of different types of electronic payments adds a layer of complexity for some businesses," Luria said.
Because of that, BizPayO's service of offering one dashboard to track payments and collections could help small-business owners address their challenges, Luria added.
"That is why these types of features also are often part of accounting packages such as Quickbooks and Xoom," he said.
Through BizPayO's Cash Flow Optimization Platform, the business owner sets up a communication mechanism with the buyer, explaining the various milestone dates and how much payment is due. When a first payment is made, the payment credentials are tokenized and saved into the BizPayO system for use on the upcoming payments.
The customer does not have to send payments again, at least not in the traditional sense of sending a check or providing a credit card for payments.
"The payment just comes as part of the customer engagement," Ratafia said. "The business owner has the control in the way they engage the customer and establish the milestones. If the customer is being difficult and not agreeing with the milestones initially, then the business owner knows he may have a problem getting paid by this customer."
Initially, White Plains, N.Y.-based BizPayO is targeting service businesses like accounting firms, IT professional services providers, digital agencies and freelancers to help them automatically track their payments from when a client opens and electronically signs an initial proposal to when payments arrive in their bank account.
But any business that doesn't have a physical store, such as roofers, landscapers and contractors, could benefit from BizPayO's platform, said Marc Howard, chief strategy officer for BizPayO. But the company plans for a major online play in the coming years.
"We are gearing up for e-commerce because it is a huge opportunity, as we like to think of ourselves as a platform like Stripe, but without the processing fees," Howard said. "We are working on being able to integrate into other systems, and that's going to be a huge avenue for us."