Why Getting Paid is Still a Headache for Businesses

Getting paid is fundamental to any business. That is almost a truism. Yet for businesses that rely on invoices – and there is 2.5x more payment value handled via invoice every year in the UK vs Ecommerce transactions – it’s still a perennial headache.

In this blog, we’ll unpick why that is. We’ll also explore some of the myths around payments and explain how our approach is different, focusing on improving payment practices and terms for business customers.

The pain points that just won’t go away

Despite 20+ years of fintech advances, getting paid is still too time consuming and expensive for businesses. The invoice process remains a challenge, with overdue payments and payment delays causing significant problems.

Late payments, which cut into cash flow

Late pay and delayed payment are huge problems. Research suggests that 27% of UK SMEs are owed between £5,000 and £20,000, while Xero puts the cost of late payments at £1.6bn in 2023.

The key reasons for these payment delays include:

Lack of incentives for payers to pay on time
Inefficient, often manual processes for chasing payment and failed Direct Debits
Manual work to apply prompt payment discounts and late payment charges UK
The effort it takes to create and manage instalment plans.

The impact is particularly harsh for small businesses and freelancers, leading to cash shortages and a reliance on expensive credit. Non-payment of invoice can even result in a late payment on credit report for the affected business.

High fees, which eat into margins

Payments has traditionally been complex. Providers have taken advantage of the complexity to deploy complex fee structures which are often incomprehensible by design. For invoicing businesses in particular, we see a number of issues:

Invoicing businesses paying Ecommerce card prices – despite the dramatically lower risk involved in accepting payment for invoiced goods and services (which have already been delivered and accepted by the payer)
Lack of innovation by the incumbent providers, who have done little to push payers onto lower-cost payment methods like bank transfer and help billers manage this switch (and no - just “adopting open banking” is not the answer either, as we’ll see below)
Frankly cheeky pricing activity from incumbents, who impose price hikes and deploy complex, multi-tiered products to bamboozle customers into paying more than they should
The lack of one good provider that can handle all payment types (including credit card and debit card), distribution requirements, and payment reminders – compounding the issues above as billers are forced to work with multiple providers, all imposing their own fees, contracts and minimums.

Disjointed systems and the cost of inefficiency

Many businesses operate with a patchwork of payment systems that fail to integrate, leading to inefficiencies but increasing the risk of errors in financial reporting and reconciliation. Major headaches include:

Configuring and managing multiple vendors across payment types
Seeing in one place what you are owed: often it requires reconciling multiple sources, stopping payment performance at a glance
Navigating different reporting and reconciliation processes. Before billers adopt Adfin, they typically spend days managing these processes. Eliminating this gives them the time to focus on true value-adding activity
Poor support and service – from often global businesses that are well past the phase when they cared deeply about your business.

These issues have a real impact on cash flow: recent research found that 28% of SMEs only have cash reserves of between one and four months. So getting payments right isn’t just a nice to have: it could be life or death for many small businesses!

If this is such a big problem, why hasn’t it been solved before?

In our view, there are two main reasons:

The lack of the right technology platform
The lack of the right incentives.

At Adfin, we are building to solve both. Our single platform integrates all the main payment methods with intelligent payment reminders and chasing for the first time, giving billers a single source of truth and eliminating complexity. This was a huge technical challenge only made possible by the advances in infrastructure in the last few years and our highly skilled team.

For example, our customer Helpbox was able to reduce payment costs by 58% by switching to us from the current market leading providers, and saw three times as many supplier invoices paid before or on the due date - and this was barely 2 months after going live!

And we are building a comprehensive suite of products to finally create the right incentives for payers to pay their invoices on time - but this is a topic for another post about payment policies and late invoicing rules…

We believe in giving payers choice

Adfin’s platform has been built to offer truly best-in-class payment experiences across manual bank transfers, open banking, cards and direct debits. Our team has been in the payments and banking industry for years, so building these systems is in our DNA.

We firmly believe a multi-payment method approach is key. If a direct debit fails, for example because the payer has run out of money in the linked account, it might be far better to ask them to make a card payment (like Adfin does). Open banking payments have been made by 11% of the UK population - and only 50% of the population has a mobile banking app on their phone. Restricting yourself to just open banking therefore immediately puts you out of the picture for half your potential customers. No one payment method can solve all your problems.

Moreover, as we saw above, managing multiple providers adds cost and reduces efficiency. And this goes both ways: by handling all your payment methods and therefore higher volumes, Adfin is able to provide lower pricing.

The future of invoice payments

We truly believe that what we’ve built at Adfin is the answer – or at least the start of the answer – to the traditional problems with invoice payments. Our payment automation solutions address issues like missing payments, payment tracking, and improving overall payment behaviour.

If what we’ve written here resonates with you, we’d love to chat more and see how we can help transform your business. Our team can discuss payment flexibility options, contractual payment time, and strategies to improve your accounts payable processes. Thank you for reading!

To find out more, book a slot with one of our payment experts.

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