The UK’s late payments problem is so serious that it now contributes to the closure of 50,000 firms each year according to the Federation of Small Businesses. But the French invoice finance provider Aria is convinced that its technology-enabled solution, launching in the UK this month, could help reduce that number.
In its home market, Aria has been growing at a rate of 25% a month since its launch in 2021, and CEO Clément Carrier is convinced the UK could be an even bigger market. “Our growth has been fuelled by solving a real problem for freelancers and businesses,” says who co-founded the business with partner Vincent Folny. “Opening up the UK market is an important step in our journey to change the way businesses pay and get paid.”
The concept of invoice finance is relatively straightforward. When a business completes a piece of work for a customer – a large company or public sector organisation, say – it must usually wait a set period for payment; 30, 60 or 90 days is common, though there is no guarantee the bill will be paid on time. Instead, the business could ask an invoice finance provider to pay what is owed straight away, minus a fee for the service; the provider then gets its money back from the customer later on.
Aria’s model is slightly different in that its invoice finance service is primarily aimed at the business-to-business (B2B) platforms through which many large companies now commission work from small businesses and freelancers. These platforms can embed Aria’s invoice finance proposition intotheir own technology, white labelling the service and customizing the customer experience.
The net result, however, remains that the freelancer or small business gets paid in a much more timely way. Aria believes the service is also value-additive for the platform, improving the experience that freelancers and small businesses enjoy when transacting through it. Buyers, meanwhile, can continue to settle their accounts on standard payment terms of up to 90 days.
Progress on later payments is needed desperately, says Tina McKenzie, chair of policy at the FSB. “Small firms are already being stretched beyond their limits with rising energy bills, rampant inflation, and a mounting cost of living crisis,” she warns. “Cash flow is already tight, and that is compounded by being kept waiting months for invoices to be paid, which is a serious roadblock to growth and investment; this also hinders productivity due to the excessive time and effort expended on chasing late payments.”
Research suggests the UK is suffering particularly badly in this regard. The average small business now reports a payments delay of 15.6 days, the worst figure since 2016. One in 10 companies in the UK admit they deliberately delay payments to suppliers by more than 30 days.
One result of this has been strong growth in the invoice finance market across the board. Data from UK Finance reveals that providers supported £314 billion worth of client sales in 2022, up from £276 billion in 2021, and well ahead of the previous record of £288 billion in 2018.
Leading providers include fintech firms such as MarketFinance and GapCap, specialist financing firms including Bibby Financial Services, Aldermore Invoice Finance and Close Brothers Invoice Finance, and mainstream banks, which make advances through their commercial banking services.
However, Aria believes it has spotted a gap in the market for an embedded invoice finance solution for platforms. By enabling freelancer platforms and B2B marketplaces to offer invoice finance themselves, the burden on suppliers, who might otherwise have had to arrange their own invoice finance, should be released. The technology can also be implemented into software-as-a-service models, or even into the enterprise resource planning (ERP) software of large businesses.
“Post-Covid and in the current economic climate more and more companies are looking online for contingent workforce solutions,” says Tom Lamb, who Aria has hired to head up its new UK operation. “By working with our platform partners, we make solving this crucial issue for businesses and freelancers simple, easy and automated,” he claims.
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