Small Business Owners: New Option for Dealing with Slow Paying Clients

Naperville small business law attorneys, Tradeshift, Payplant, inefficient invoice processing systems, waiting for payments, slow paying clients Landing a big corporate or state client is the dream of most small business owners. However, once invoices are submitted they often have to wait months for payment. While bigger corporations can absorb the costs associated with waiting for payments, small businesses often find themselves struggling financially while waiting for money they are owed in order to keep operations going. It is common knowledge that big corporations, and the state of Illinois in particular, can take as long as 120 days or longer to respond to invoice requests. Luckily, a few startup companies are looking to change all of this by extending credit to small business owners that is based on the payments that will eventually be received from clients.

Two startups in particular, Tradeshift and Payplant, use the Internet to deliver cash advances to small businesses who need money while waiting to be paid for work that they have already completed. After extending credit, these Internet businesses are then paid for their services and the credit extended, once invoices are finally resolved. These new innovative credit extension systems utilize cloud computing functions in order integrate enterprise and accounting resource planning systems. Web-based workflow functions are utilized in the operations of both startups in order to facilitate the payment and invoice approval processes.

FinTech (Financial Technology) Startups Payplant and Tradeshift

Tradeshift has been in business in Europe since 2010, and recently expanded its operation into the United States. Its services are used by large companies, and some services are free for those suppliers who use Tradeshift to submit invoices. Tradeshift works in partnership with banks who fund the invoice credits that Tradeshift provides to businesses. Tradeshift partners with both small businesses and big companies by providing a cloud-based platform that allows for the easy handling of invoices. In its research, Tradeshift found that large companies need assistance with their inefficient invoice processing systems, which often use paper to process millions of transactions annually. As a result, Tradeshift provides businesses with an electronic cloud platform for submitting and paying invoices. After submitting the invoice, the company has the option to commit to paying an invoice within a specified timeframe.

From there, Tradeshift finance partners such as Citigroup will offer to pay the balance of the invoice on behalf of the company in exchange for receiving the money back at a competitive rate. The payment by the bank pretty much functions as a loan or line of credit, that will ensure that invoices are paid quickly, even when the funds are not currently available to the company who has been invoiced. Even if the funds are technically available, the business’s process for paying and tracking invoices may be so complicated that using Tradeshift will give the company time to complete invoicing procedures without the stress of meeting a strict invoice payment schedule.

Payplant focuses on helping small businesses who are dealing with clients of big companies who do not pay invoices in a timely manner. Small business owners can go to the Payplant website and access the new Pay Me Now Payplant service. After answering a few questions on the Payplant website, members provide access to tax records. From there invoices are uploaded and then verified by Payplant, who then will wire the invoice amount to the small business owner at a rate of 1.2 percent each month. The funding for invoice payments comes from Payplant’s personal investment fund. One of Payplant’s big name clients is the state of Illinois. Notorious for late invoice payments, Payplant now oversees the payment of Illinois state bills, and pockets a 1 percent penalty fee for any payments that Illinois did not make on time.

Do you need the advice of a business law attorney? Contact the Naperville small business law attorneys at the Gierach Law Firm in Illinois for any issues or questions you have regarding business law.