Service sector

Service Industry Subscriptions Lack Automated B2B Payments

The consumerization of B2B payments is often said to be one of the hottest trends in the FinTech industry today.

But, for all the fuss about the hundreds of different billing platforms and payment providers in the space, the fact remains that the trend continues at almost glacial speed for many businesses, where most transactions remain rooted in paper invoices and payments. are always mailed through a physical check.

However, this need not be the case. In the Software as a Service (SaaS) space, businesses have their payment processes firmly ingrained with automated, recurring billing that helps minimize the risk of error or fraud.

The problem is that what works for these companies doesn’t work well in the world of B2B service providers, where invoicing and invoicing are done irregularly and transaction amounts are constantly changing.

“Recurring payments are great, and they work really well for e-commerce,” said Anchor co-founder and CEO Rom Lakritz. “But when you look at service providers, the only real constant in recurring payments is change. So it’s not really recurring at all.

Further reading: 25% of Accounts Payable professionals say duplicate invoices and payments are major issues

Too often in B2B scenarios, payment terms change. Companies rarely charge a vendor the same amount, even if they do business with them all the time.

One month, the business may order more or less of the same supplies, and so the bill changes – or they may need to add additional expenses to a bill in some months, so recurring payments just don’t work. Or, at least, they didn’t until Anchor arrived on the scene.

The company, which primarily targets small and medium-sized enterprises (SMEs) in the service provider sector in the United States, is looking to expand after raising $15 million in a seed funding round earlier this month. , and she reached a very new idea.

Anchor aims to take all the basics of recurring payments in e-commerce that work, like preventing late settlements and reducing errors, and rebuild them in a way that service providers can work with.

See more : FinTech startup’s Israeli anchor closes $15m seed round

Anchor takes the basic agreement between a service provider and a customer and hosts it on a private “microsite” that only they can see. The site serves as a place where any changes to this agreement can be updated, allowing both parties to automatically manage billings, invoices, payments and reconciliation on one platform.

“Once the service provider and their customer come to an agreement on the basic terms, it becomes a living online agreement that both can see, where they can change things in the future,” Lakritz explained. .

Through this agreement, service providers can address revenue leakage issues that occur when one or both parties forget to update an existing agreement.

Lakritz gave the example of a lawyer who works on a project for $15,000 a month and later decides he needs to be paid more because it involves more work than initially thought. But, often times the attorney forgets to tell someone else to update the agreement, Lakritz said, because he has to remember to do it along with a million other tasks he has to. accomplish.

Anchor Lifetime Agreements also address other issues, including the risk of duplicate bills and fraud. One of the main reasons B2B payments are riddled with errors is that there are so many people involved in the process. The person who makes the decision to buy something is not the person who pays the bills – someone else is doing it, and that leads to the risk of mistakes.

With Anchor, the decision maker is connected to the payment process and must sign it, eliminating the risk of fraud or duplicate invoices.

More like this: B2B customers now expect a seamless B2C-like shopping experience

“Once someone works with a service provider on Anchor and the procurement staff signs that agreement on Anchor, nobody can make changes,” Lakritz said. “So we have literally removed the risk of fraud, both internal and external.”

Errors are also reduced as Anchor’s process ensures that there are no duplicate invoices or duplicate items on an invoice. Additionally, its software highlights all the items that need to be checked when a payment arrives.

Lakritz said more than anything else, Anchor really tries to build trust between the two parties. If people can trust the bills they receive from service providers the same way they trust a bill from a company like Amazon or Netflix, billing and payments won’t be such a burdensome process.

With trust, payments will flow, and then the true consumerization of B2B will happen, Lakritz said. He sees a world where everything becomes as digitized and automated as possible, and he thinks that will happen within the next 10 or 15 years.

“Trust is the basis of everything. It’s the basis of a marriage, and it’s the basis of any relationship between a salesperson and their customers,” Lakritz said. “I don’t see people signing deals in 10 years that aren’t online, fully live, and automated like everything else.”

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