When your business revolves around helping companies unlock value across their financial operations, you have to evolve with technology if you want to keep offering the most responsive solutions.
That is a big part of Basware‘s growth strategy early in its fourth decade of existence, Ad van der Poel said. Mr. van der Poel is Basware’s Senior Vice President of Financing Services. We spoke about the challenges companies face as they grow and compete in the global economy.
While some services bring new value into a company, many of Basware’s offerings unlock existing value which is blocked by inefficient systems and processes, he explained.
By continually developing solutions which leverage new technology, the Finnish company has grown to become both the world’s largest e-invoicing and accounts payable platform along with one of the largest B2B networks.
The company has customers — including 2,500 large buying organizations — in more than 100 countries. They collectively processed more than $500 billion through the network in 2014.
A key to Basware’s growth, and one which attracted Mr. van der Poel to the company, is its open-network philosophy. In every exchange only one company has to be on the Basware system to complete the transaction.
This works because, in addition to the more than one million customers on its network, Basware has agreements with 200 other networks to facilitate transactions between them.
“It works that way with mobile phone networks,” Mr. van der Poel said. “I strongly believe it should be that way with e-invoicing too.”
The logical nextstep in Basware’s evolution is to offer financing, Mr. van der Poel said.
“We know the buyer, supplier, the order, the invoice amount, and when that invoice is approved. Those are the five key elements for financing and initiating a payment.”
“It’s an everlasting dilemma,” he continued. “The supplier wants early or on-time payment and the buyer wants to pay as late as possible.”
There are a few different options to meet these working capital funding needs but they are all based on four key elements — the payment, funding, timing and discount. By adjusting each one, different financing products can be produced which meet the unique needs of a specific client group.
One year ago Basware began providing virtual card payments through a partnership with MasterCard called Basware Pay. When an invoice enters the system and is approved, MasterCard provides a virtual card number which is only good for that specific invoice, Mr. van der Poel said. That virtually eliminates potential fraud.
It is also a win-win for both the buyer and seller. The seller receives prompt payment while the buyer extends their payment due date by up to 70 days. The buyer can receive a credit card statement a month after paying then have another month to pay it.
The challenge with this method sits with the supplier, Mr. van der Poel said, as they pay a percentage of the invoice’s value. That means it is better for smaller suppliers and smaller value invoices. They will not mind one or two percent on a $1,000 invoice as the price for early payment.
Automation is what maximizes the efficiency of these processes. Whether it be virtual credit card payments or the dynamic discount percentage, everything can be automated, Mr. van der Poel said. If a payment is due in 30 days, the buyer discount is automatically calculated based on when the payment is received.
On the supplier side, Basware research shows 80 percent of suppliers are willing to give a discount for early payment, a figure Mr. van der Poel admitted was eye opening the first time he saw it.
The reason becomes clear once companies complete a spend analysis, he said. Many small invoices go past due and become an administrative burden, as extra contacts have to be made to cajole the buyer into paying.
“Many companies pay late yet they are cash rich,” Mr. van der Poel added.
On the supplier side, a small company may have 100 clients with 100 monthly invoices. Maybe 25 percent pay early through dynamic discounting or supply chain financing. That leaves 75 companies, many of whom could be cash rich.
Basware Advance will soon be an option, Mr. van der Poel said. The supplier sends those 75 invoices to their customers via a model identifying which ones qualify for financing through the Virtaus cloud financing tool. Those opting for financing pay 100 percent of the invoice with the supplier receiving 95 to 98 percent of the total and the financier the remainder.
Basware Advance will soon debut in the United Kingdom and will be gradually rolled out in other markets later this year.
Basware recently began offering a pair of additional features, Mr. van der Poel said. Business Directory lists all companies connected to the Basware Network, whether it be directly or through a partner. It helps suppliers meet new clients and communicate with existing ones the find on the network.
Vendor Manager is a tool which helps vendors of larger organizations manage their own data on the Basware Network. They can pay invoices and can also change certain data fields in order to be paid more efficiently.
Mr. van der Poel also shared some thoughts on a few additional topics.
The low, and in some cases negative interest rate environment provides extra incentive for companies to pay early, Mr. van der Poel explained. If a company actually has to pay to leave money in the bank, they can use that cash to pay early and get a discount, giving them a few extra percent to deploy in a more profitable manner.
Cloud technology provides enormous benefits as system maintenance, upgrades and the introduction of new features are easy to perform. Connecting software systems is also easy.
The technology behind blockchain holds promise for B2B networks, though the industry is in the very early stages of adapting it.
“That may come in one or two years,” Mr. van der Poel said.