If you have run a business or worked as a freelancer, you’ve probably encountered the frustration of invoices that aren’t paid on time. In the worst cases, late-paid invoices can bring a business to its knees.
Those blighted by customers who pay late have a choice of borrowing money from a lender who charges interest to advance most of the money, or taking legal action. But if Manchester-based Payful has its way, companies will know who’s likely to pay on time before they even do business with them.
Billed as “a community of businesses with good track records of paying invoices on time”, Payful integrates with accounting software to track how quickly businesses pay each other. This generates a ‘Payful score’ for each business, letting everyone else in the network see who is a reliable payer. And because each company knows they’re being judged on the promptness of their payments, there’s a strong incentive to maintain a good score.
Co-founder and CEO Andy Taylor’s mission to “end late payments around the globe by 2032” has been a long time coming. His career in tech over the past seven years has focused on invoice finance, cash flow, and credit histories, via stints at fintech startups in Manchester and London. These included the well-documented DueCourse and his own consumer offering, HelloCredible.
But he says he couldn’t stop thinking about how to solve late payments before they become a problem, rather than compounding the problem by adding further debt into the mix.
As the Covid-19 pandemic bit into businesses’ bottom lines, Taylor says he took the opportunity to do some research.
“Credit control teams were on furlough, and so nobody could chase invoices. Nobody could get paid. So I launched an experimental business collecting overdue invoices — literally just an agency collecting overdue invoices. It gave me direct access to business owners and FDs [financial directors] who were at that point in a distressed position. I was able to ask them a series of questions…. And there was one particular question that I would always ask: ‘if you could go back in time now, what would you do differently?’
“And remarkably, all of these business owners and FDs responded with the same answer, which was ‘I wouldn’t have dealt with that business’. That’s when I realised that the actual problem is not late payments. Late payment is just a by-product of the real problem, which is visibility around payment behaviours.”
And lo, Payful was born, with Taylor bringing in a former colleague to build the technology.
Payful could have drawn on its users’ accounting software data to generate payment scores for every single business they invoiced, and then shared that score with every other user. This could have quickly racked up data about a huge number of businesses.
But in 2022, that would have meant cruising into a data protection compliance nightmare, not to mention, no doubt, potential legal action from companies that disagreed with their scores and wanted them changed or removed.
So Payful has gone down the far more ethical and potentially interesting route of a payment community. Every business who signs up knows they will be scored, and will benefit from seeing all the other Payful users’ scores. And that mutual score-sharing should encourage users to pay each other promptly. It’s a little like how an Uber driver and their passenger are incentivised to be nice to each other because they know they’re going to be scoring each other at the end of the ride.
This has the potential to see Payful become something I’m surprised we’ve not seen more of over the years: an almost social network-like layer over business processes that builds trust and generates efficiency.
Back when it first started in the late 2000s, Denmark-born Tradeshift presented itself as a B2B social network for invoicing, and while it still talks about the power of networks in its current form, it’s a very different beast from that simple original pitch. These days, London fintech startup Nook — operating at a later stage in the business payments process to Payful — says it envisions “a trade network that ultimately replaces the need for businesses to exchange PDF documents”, but a platform-based community around business transactions is yet to materialise in a fully-formed way.
It’s still early days for Payful. It has launched an initial beta, which is currently in testing among a small group of businesses in the UK and Cyprus. Taylor is aiming for a global launch out of beta within six months, but for now it’s been building up a waiting list largely through word of mouth and referrals.
In terms of competition, Payful is putting itself up against credit reference agencies like Experian, credit checking companies like CreditSafe, and the many companies who lend money against unpaid invoices.
Taylor says Payful was designed to fill the gaps between the offerings of these incumbents, and if he can build a critical mass of businesses around the concept of reliable payments, I can easily imagine Payful being able to offer other features and services to those companies. Communities can be powerful engines.
But solving late payments is clearly Taylor’s passion. He sees Payful’s future as a credit reference agency itself, albeit one able to circumvent a blind spot for traditional agencies.
“The issue that credit reference agencies have is they’re confined to a region and a territory,” he says. “And this is one of the problems that businesses highlighted during our research phase. It’s very difficult to do a credit reference check on a business, let’s say, in Australia, and that’s because credit reference agencies don’t have the resource or authority to hold credit scores on businesses in Australia or America or France, or wherever it may be.
“We want to be as big, if not bigger than Experian and we believe we can do that because we have global reach.”
Let’s face it, if Payful can become a ‘friendly’ credit reference agency that businesses genuinely, unreluctantly want to be part of, it will probably have achieved a world first.
When it comes out of beta, Payful plans to charge businesses a monthly fee to be part of the service, accessibly priced to encourage participation. And there are plans for enterprise APIs that will allow banks and lenders to tap into the startup’s data on a commercial basis.
Taylor has bootstrapped the business to date, investing primarily in building the underlying technology. It currently integrates with the popular Xero accounting software, but hooks into others like Sage are on the way. Now Kimberley Waldron, the well-connected co-founder of fintech-focused PR agency SkyParlour, is joining as co-founder and CMO to help the business grow.
To bring Payful out of beta and onto the market, the startup is currently raising a pre-seed investment round.
This is an article originally published by PreSeed Now which can be viewed here.