Praetura on invoice financing offers
When it comes to B2B payment delays, the UK has become the center of what has become a global conversation about responsible and fair B2B payment practices.
The market is among the most vocal about B2B late payment issues, which can be particularly damaging to small vendors. At the same time, the UK government grabbed the headlines with its efforts to address the issue.
One of the strongest initiatives that have emerged from the aforementioned government efforts is the UK’s Prompt Payment Code, which was recently overhauled to tighten B2B payment expectations for its signatories. Yet the Code remains voluntary and the UK market, like many others around the world, offers limited options when it comes to the legal application of good supplier payment practices.
Ray Lowrey, Managing Director of Praetura Invoice Finance (PIF), recently told PYMNTS that while these efforts are a positive development, there are other factors that need to be considered to address the treasury challenges of small vendors. He discussed some of these factors and explored the opportunity for Praetura Invoice Finance to expand access to capital for small and medium enterprises (SMEs) in need.
A wider conversation
When exploring the issue of B2B late payments, one tends to assume that this practice is the result of large companies intentionally delaying payment beyond the terms agreed to their small suppliers.
While this is often the case, the topic of B2B late payments should perhaps consider expanding to the issue of longer B2B payment periods.
“I would say, in many ways, that an equally serious problem has been the propensity of many (usually wholesale) customers to demand or impose longer payment terms on their customers. [SMB] suppliers up to 90-120 days, ”noted Lowrey. “Numerous [SMBs] feel that they have no choice but to accept these and therefore have to wait for their money and find ways to deal with the impact on working capital.
At the heart of the larger issue of late payments is the subject of longer payment terms. After all, an organization that imposes 120-day payment terms on a small vendor doesn’t necessarily pay a late bill, but still takes months to settle the bill.
And while the prompt payment code requires signatories to agree to 30-day payment terms (reduced from its previous 60-day payment terms requirement in January of this year), it remains voluntary.
Expand working capital options
Given the importance of small businesses to the economy at large, ensuring healthy working capital for small and medium-sized enterprises (SMEs) is not just about supporting individual operations. As such, it is essential to ensure that these small businesses have options when it comes to accessing finance.
Invoice financing can be particularly useful, and as a growing number of factoring providers have entered the market in recent years, Lowrey said companies aren’t just looking for digitization and efficiency from their providers. financing invoices.
“There have been many FinTechs that provide [SMB] finance in the UK, and their services will suit many businesses, but many others want a more personal and service-oriented approach, ”he said.
Praetura recently announced the creation of a new division within the organization, called Praetura Invoice Finance (PIF), which will present invoice financing offers to small and medium-sized businesses (SMEs). The launch aims to meet the personalization needs of businesses when selecting a finance product, which Lowrey believes should be a priority for small businesses who today face a mountain of choice of products from a mountain of suppliers.
Read more: Praetura will help SMEs with flexible financing
“I would recommend that [SMBs] take the time to talk to the proposed vendor to make sure they understand their business needs and offer a tailor-made solution, rather than a “one-size-fits-all” approach, ”he noted.
In addition to the cost of financing, providers should offer ancillary services like credit monitoring, as well as the flexibility to adjust financing offerings as the business grows and its needs change.
With digitalization providing new opportunities for small business finance to optimize their products, Lowrey also noted that tools such as data mining and open banking technology can further improve the finance process for small to medium businesses and the financial.
Not only having options, but understanding which options might be most effective for individual needs, will be an important part of easing the pain of late B2B payments and longer payment terms for the small and medium business community.