Dealing with late and missed payments from creditors is a chronic complaint of small businesses, who are often stretched too thin to chase down money owed to them. But a U.K.-based startup aims to attack that problem with YayPay, an automated invoicing platform with a bill-collections feature that launched this week in the U.S.
YayPay streamlines the bill-collection process with a mixture of automated and human-powered collections, likening its services to a combination of debt collection, bookkeeping and cash-flow management, priced for businesses with annual revenues of less than $5 million.
“Many small businesses don’t have the manpower to react quickly to late bills, and the smaller you are, the longer it takes to get repaid,” said Anthony Venus, the company’s CEO and co-founder. Venus estimates the likelihood of a bill getting paid decreases by 10% each month past its due date.
YayPay takes over the invoicing process, sending creditors the initial billing statement via email from the YayPay user. YayPay keeps track of which bills have been paid, and sends periodic reminders of upcoming bills due via email or text. When a bill is four days past due, one of YayPay’s collections agents telephones the creditor to discuss payment, including working out repayment terms.
YayPay operates in the “precollection” stage of handling overdue bills, Venus said. “We don’t provide the full services of a traditional debt collection agency, and we don’t take a percentage on the collections,” he said, adding that YayPay also is in compliance with all consumer protection regulations surrounding collections.
Small businesses pay a monthly fee for YayPay based on invoice volume, ranging from $29 to $189, with different levels of live collection agent services included. At the lowest end, customers with up to five unpaid invoices per month receive 30 minutes of live-agent collection services per month free; additional collections services are 89 cents per minute. At the highest end, there is no limit on the number of unpaid invoices YayPay handles, and live-agent collections services are 79 cents per minute.
Bill recipients may opt to make payments directly to the small business through existing channels or by check, or they may pay using a link YayPay embeds in each invoice that includes options to pay via ACH. ACH payments are 10 cents to 25 cents per payment, based on monthly volume. Payments via PayPal or credit card are 2.9% of the transaction.
But payment fees aren’t the central part of YayPay’s business model, Venus said. “We charge a transaction fee to cover our costs, but the company’s revenues come mainly from the monthly service fee,” he said.
Small businesses subscribing to the service can see an up-to-date status on all outstanding bills by logging in to YayPay’s platform, where they can customize their preferences about how they want YayPay to contact each creditor. YayPay typically sends an email reminder of bill a week before the due date, followed by a personalized text message two days before the bill is due.
Sending timely reminders, which many small businesses don’t have time to do, can dramatically improve a company’s overall cash flow, according to Venus. Where large businesses typically operate on a 30-day billing cycle, it’s not uncommon for small businesses to operate on a 60-day or 90-day cycle because of slower or manual processes.
In the collections industry, getting a verbal promise to pay on an overdue bill is very effective, according to Venus. “If people make a promise, they are two to three times more likely to pay,” he said.
YayPay provides a turnkey integration path to its platform for small businesses using Intuit business management software, and the company is working to develop similar integration approaches for other accounting programs, Venus said. YayPay also provides systems for small businesses to migrate existing invoicing systems from Microsoft Word or Excel to its platform.
Small business payments traditionally lag other categories, but technology companies are increasing their attention on the sector. Analysts say YayPay has identified a particular area in small business that needs help. “The corporate sector is using new technology to streamline and speed up the order-to-cash cycle of sending out invoices and payments, so it seems logical there’s room for growth in the same area for small businesses,” said Brian Riley, principal executive advisor with CEB TowerGroup. “Collections isn’t a core competency for small businesses.”
The complexity and diversity of the small-business market could also be tough to address with a single solution, another analyst suggested. “The behavior around bill-payment in different businesses and industries varies widely, so it might be difficult to get the best results with such a generalized approach,” said Joel Pruis, a senior director specializing in commercial payments with Cornerstone Advisors. “But there’s certainly lots of room for improvement in automating and streamlining small-business invoicing,” he added.
One of the reasons YayPay decided to launch in the U.S. before expanding to the U.K.—next on the company’s blueprint for growth—was the sheer size of the U.S. small-business market and the high proportion of companies still processing invoices manually, Venus said. “There are various accounting solutions out there, but small businesses really have not had ready access to an accounts receivables office, and we plan to give it to them, and help speed up their cash flow,” he said.
Venus and co-founder Saul Frank registered the company in Delaware and next month will open a San Francisco office.