Join us in an exciting conversation with Alexandre Louisy, the co-founder and CEO of Upflow, as he and host Adam Larson tackle the challenges of ensuring timely payments in the B2B world. Alexandre shares his insights on modernizing payment methods, stressing why online payments are crucial for both vendors and customers. Learn why manual invoices and checks are becoming outdated and how automation can save time and money. Alexandre's passion for integrating finance and customer experience shines through as he discusses the future of digital payments and what it means for your business. Plus, get practical advice on how finance teams can drive effective change and simplify the payment process. Don't miss this engaging and informative episode that promises to change how you think about B2B payments! Tune in now and stay ahead of the curve.
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Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Adam Larson (00:22):
Welcome to Count Me In. Today, we're joined by Alex
Louisy, cofounder and CEO ofUpflow, to explore the evolving
b to b payment landscape. Alexhighlights the challenges of
ensuring timely payments and theneed for more modern online
methods that give vendorscontrol while improving the
customer experience. Wediscussed the inefficiencies of
manual payment process, thebenefits of automating invoice
(00:46):
reconciliation, and thecompetitive edge gained from
digital payments. Alex alsostresses the significant impact
of late payments on businessesand offers strategies to
encourage customer adoption ofnew payment methods.
Tune in for actual insights onoptimizing your order to cash
cycle, enhancing departmentcollaboration, and driving
financial success. Alex, I'mreally excited to have you on
(01:15):
the podcast. And today, we'regonna be covering things about
the business, the the b to bpayments in that landscape and,
because you're definitely anexpert in that with your
organization, Upflow. And sojust to start off, what is the
kind of the current state of theb to b payment landscape? And
what trends are you seeingemerge, especially as you're
looking at a lot of data, youwork with a lot of customers,
and it's, it's definitely an upand down, especially with the
(01:37):
way the economy is today.
Alex Louisy (01:39):
Exactly. So first of all, thank you so much, Adam,
for having me today. I thinkwe're very happy to share like,
some of the learnings that we'vehad from working, as you said,
with many, many customers andcompanies trying or actually,
actually getting paid. I thinkthe landscape is quite
interesting because it's movingfast, right? I think that's the
first thing that we would haveto say.
If you look at like all otherindustries, consumer payments,
(01:59):
everything has already shiftedin some ways, but B2B is still
at the very beginning of like ashift. And that would be what I
would say as like the firsttrend that is interesting to
notice is the fact that, like,we're still in the early stage
of like a big shift towardsprobably online payments. Right?
So I think if, if we look atthis report that we're going to
publish on a regular basis, ifyou look at this specific,
(02:21):
session of this episode, thefirst thing that I would say is
that we notice a starkdifference between industries,
right? Whether it's about DSOsor their sales outstanding, how
long does it take you to getpaid?
Or, you know, the kind of likewhat we call the at risk rate in
terms of like the problems thatyou're just never getting paid
by your customers. You can seethat there's a wide difference
per industry, right? Someindustries, typically the
(02:44):
industries are toward liketechnology and subscription
based type of business usuallyhave much better terms in terms
of DSOs and at risk rate thanthe more traditional industries.
So think about manufacturing oranything that is related to
consulting firms. These are likethe worst industries when it
comes to getting paid on time byyour customers.
(03:05):
Right? Under this kind of, like,first, frame of looking at the
the numbers, there's anotherinteresting aspect of it is that
if you look at, like, thetraditional one, the one that
are not performing really well,if you look at, like, one
specific industry, then thevariance is much larger than in
the good industries. Right? Andwhat is interesting there is to
(03:25):
think that, like, yes, sometimesyou're in an industry where on
average, you're not gonna getpaid really fast. But if you
implement the right strategy,you're probably going to be paid
much faster than yourcompetitors or people that are
in the space.
So that would be something thatwe find quite interesting
because I think it tells a lotabout the fact that, like, as a
finance team, there is thingsthat you can do to actually get
(03:46):
paid faster. So that's the firstgeneral trend. The second trend
that we see in general that wethink is fascinating is the fact
that whenever you're using,like, modern payment method and
specifically online paymentmethod, you get paid much, much,
much faster. And that's not aquestion of, like, whether
you're a consulting industry or,the tech industry. This is just
(04:07):
across the board implementingonline payment method and making
the checkout experience for yourcustomers simpler.
Adam Larson (04:15):
Mhmm.
Alex Louisy (04:15):
Accelerates your payment, and that's something
that is really interesting forus to think as finance teams as
well.
Adam Larson (04:22):
That is very interesting because, you know,
obviously we have to get paid tobe able to pay our bills, to be
able to continue running as anorganization. So, that's hugely
important. What kind of impactdoes late pay do late payments
have on organizations? And I'mI'm sure if you if anybody works
in an organization, they seethat impact, but maybe we can
talk about, like, can wequantify that a little bit?
Alex Louisy (04:41):
You know, the first interesting thing is that a lot
of people actually don't see it.Right? There is the statistics
around the fact that, you know,like like probably like like 25%
of business go going bankrupt,go bankrupt because of late
payments. Right? That's like thekind of moment where you see the
reality quite hard, like, andthat's where you see it.
But in general, you know, whenyou talk to finance teams, yes,
(05:03):
it's not perfect. Yes, it takesthem like a lot of time. It's a
headache because they need to goafter unpaid invoices and chase
customers. But when you askthem, can you actually quantify
how much it hurts your business?They can't really give you an
answer.
Right? And I think this issomething that is super
important because we look at itfrom many different angles. But
I think like the most basic onewould be like getting paid late,
(05:26):
and you can put a for anyoneworking in finance, a weighted
average cost of capital on howlong does it take you to
basically bankroll yourcustomers. Money sitting on the
bank account, not on your bankaccount. There's basically
something that you lend money tothem, right, in some ways.
And you can put a dollar valueon this. So that's the first
thing. But that's not the mostobvious one in terms of impacts.
(05:47):
The highest impact that we seeis in invoices are actually
never paid. Right?
And having a clear visibility onthose invoices and the
percentage of your revenue thatyou never collect is something
that is important. Now that'ssomething that we often say is
that sometimes the accountant'sgonna come and just write off
some of your invoices. Right?And this is the moment where you
(06:08):
actually recognize that you arenever going to be paid by your
customers. Yeah.
The point that we have at anoperational level is that
sometimes we see like invoicesare sitting in account
receivable for like more than 6months, 12 months, and maybe did
not reach enough. Maybe youdon't have a notice chart that
comes and say, hey, you have towrite off those invoices. But
the reality is that as anoperator, you know that they're
(06:28):
never gonna be paid. And so Ithink, you know, the approach
that we have at Outflow aroundthis is to say, well, that's how
we define, like, some kind of,like, at risk rate, which means
whether it's been written off ornot, just be mindful of like how
much of these revenues arelikely to never be collected.
And that drive those 2 metrics,drive like very clear dollar
(06:49):
value on a monthly or on ayearly basis that your business
is actually incurring because ofbad management on your accounts
receivable.
Just as a spoiler, this amountis usually way higher than you
think. And I highly encourage,like every finance professional,
to try to think around this.Like we have tools to do this,
(07:09):
but you can do this as well,like with a simple spreadsheet
because it's way, way higherthan what people think.
Adam Larson (07:17):
Yeah, definitely. And I know you have some
specific numbers, so I encourageeverybody to check out the
report. We have a link to your,uploads report in the show notes
just to get all the all thosenumbers that we're we're not
boring you with numbers today,but if you wanna check out all
those specific numbers, pleasedo that. One of the things you
mentioned that, in your firstanswer was about how technology
can kind of with help encouragethose payments and get those
(07:38):
payments come faster. But whenyou and I were first chatting a
few weeks ago, you mentionedsomething about technology
friction.
And I think that's a big part.Technology friction can impact
your late payments intransactions. Can we talk a
little bit about that and maybegive
Alex Louisy (07:50):
some examples? Absolutely. I can give you like,
an example that is not evenabout technology, but if you
just think about like, what isanti technology, which is a
check, right? This is a bigfriction in how you get paid,
right? Like having a piece ofpaper that you put in an
envelope and where you literallyhave to manually like pick it up
in the mailbox and stuff.
(08:11):
Like when you think that it's2024, right, it just doesn't
make any sense. And I think likein general, if I take this
example of checkstyle, like theextreme case, right? But in
general, the order to cash cycleand how you get paid by your
customers in B2B, this idea thatlike you send an invoice as a
PDF, that the person needs todownload it, You know, kind of
(08:34):
like open it, up on the duedate, etcetera, etcetera. All of
these steps are like riddledwith inefficiencies, right? And
the challenge we have forfinance teams is just to realize
that it's not about like tryingto invent like new payment
rails, right?
We're not saying like, youshould put everything on the
blockchain or anything thatseems like totally crazy, but
just like, even likeimplementing card payments or
(08:57):
online payment initiation sothat you know exactly what you
are paying and not having to dolike a kind of a manual cash
application. All of that is nota revolution per se. But problem
is that as a finance team, whenI need to implement that, it's
not that easy, right? Becauseit's accounts receivable. It's
your customers.
You can't really force them asopposed to vendors where it's
(09:20):
easier to tell them like, hey,if you want to get paid, here is
the process. It's, forcustomers, it's a little bit
different. And I think that oneof the things that is very
important is trying to have akind of a global approach on
like how you incentivize yourcustomers to pay with the
payment method that are best foryour business, right, as a
vendor. And this is not easy.This is clearly not easy.
(09:43):
And the challenge that you haveis that it can't happen
overnight. It's an incrementalstep. Let's say that you have a
1,000 customers. And if youthink that like you're going to
wake up tomorrow and say, well,starting now, everyone is paying
by ACH debit and I'm going tocharge you every when the
invoice is due. Of course,you're not going to get it.
Now, the problem is more aroundin terms of the incremental
steps on how you get there andhaving a strategy in mind to
(10:06):
reduce this friction all thetime so that your customers can
pay you, easier. The point thatI would say, Adam, is that, you
know, whenever we talk aboutlate payments, everyone loves to
talk about bad payers. And thereis this feeling that, like, the
only reason why, like, you getpaid late is because there's
only bad payers out there.Right? But if you've built a
business and if everything workswell, right, you usually have a
(10:28):
lot of good payers.
Right? People want to pay you ingeneral. Right? Not, like, 100%,
but most of them won't. Yeah.
And so we really wanna flip thatkind of, like, vision around
late payments to say, hey, howcan I make this experience a
better experience? Becausethat's really what it's all
about. Making this experiencesimpler and faster for everyone,
(10:48):
customers and yourself as avendor.
Adam Larson (10:51):
For sure. I mean, if you make it easier and
faster, people will be willingto pay because there's no
prohibit, prohibitations.Because when you're when you're
trying to they just think aboutas a just a regular b to c
customer. If you're trying tocheck out doing the checkout
process and that you find anychallenge, there's a lot of
probably a large percentage ofpeople unless you really want
that. You're like, I wanna gosomewhere where this is easier.
(11:11):
And so you wanna make that easyfor because because people who
are paying a b to b payment arestill b to c p type people.
Like, they're, they're still acustomer, even though they're a
business and you wanna maketheir, their stuff easy for
them.
Alex Louisy (11:24):
Exactly. It's, it's interesting what you said
because, you know, we often givethis example about like, you
know, marketer thinking aboutlike the conversion on the
website as a funnel. Right? And,you know, you're trying to
optimize every step of thefunnel. And the payment one is a
very important one, right?
If you try to pay and, you know,it doesn't work, then you're
probably going to lose the useror the customer. Right? And very
(11:44):
few people think like this whenit comes to B2B, when they issue
like a 1,000 invoices a month,which means that there is a 1000
payments that are expected tocome into your bank account. And
that reoccurs usually like everymonth. Right?
And so, you can try to thinkabout this, this payment
experience exactly in the sameway as in the consumer world.
And you mentioned the name thatI said earlier around the
(12:05):
checkout page, right? Yeah. Thisdoes not exist in the B2B world
when this is the basis of like,Hey, I want to see what I owe to
this vendor, the list ofoutstanding invoices and a
simple pay now button. How manyB2B invoices are paid like this?
It's really rare. It's gettingto this point where you really
like try to optimize this, thisexperience is really, really
(12:26):
important to be more efficientin how you get paid.
Adam Larson (12:29):
Yeah. And so it's very clear that having the right
technology in place is veryimportant, especially for these
type of transactions. What aresome of the biggest challenges
that organizations face? Becausewhen you think about it, finance
and accounting teams aresometimes the last parts of the
organization to get newtechnology. Part of the reason
is, you know, they're a callcenter, and so a lot of people
(12:50):
see them as a call center.
And so they're like, oh, we'llget to that eventually or, you
know, it's hard to get actuallyimplement projects within the
finance and accounting team. So,what are some of the biggest
challenges that you face,especially when you're trying to
adapt new technologies withinthat organization? And, how
Alex Louisy (13:04):
can we overcome these challenges? Yeah. I think
it first comes down to the thepoint that we mentioned earlier
about measuring. Right? We heara lot of people telling us like,
oh, this is not a priority.
Well, once you realize that,like, you have 1 or 2% of your
annual revenues that are nevercollected, or that you're
experiencing, like, DSOs arelike way higher than the payment
(13:24):
terms are on your invoices andthat it really hurts your
business in terms of workingcapital, then suddenly you can
shift the strategy and say,well, you think that this is not
important, but I can tell youthat this is really important.
Right? The sales people are andrevenues are usually like always
front and center, right? Whenthey close a deal, they gong to
gong, and everyone is having abig feast. But what is happening
(13:46):
if you never collect deals thathas just been closed, right?
That just closed. And so, Ithink it's important to shift
that vision and shift thepriority as a finance leader to
just say, hey, this is the realcost of like what we're talking
about. And that's why this isgoing to become a strategic
project. Right? Now, as yousaid, the finance teams are
(14:08):
usually the last one to justkind of implement the new
technologies and, andeverything.
I think one thing that is superimportant is being in the right
ecosystem. So having the rightERP or finance tool that can
actually grow with your businessand can also enable, like, the
connection with the right toolthat you need. So, you know, if
you need an expense managementsystem, of course, it's easier
(14:29):
if it connects directly to your,accounting system that you've
always been using, etcetera. Sowhich required that you've
chosen the right accountingsystem in the first place. That
that that is something that isimportant.
And then I think there is also,like, a kind of a tendency from,
you know, build versus buy wheresometimes, like, you know, we've
seen some finance teams tryingto get the engineers, get away
(14:51):
from the product. You try tobuild, like, a little payment
module as part of theirexperience, depending on like,
who are your customers. But Ithink this is usually like bound
to failure in the sense of theproduct team is first. It's not
necessarily the job to workinternally for the finance
teams. And then the second thingthat I would say is that this
requires like, you know, kind oflike a lot of dynamic changes
(15:14):
all the time, right?
Because you're going to open anew market with new currencies.
You want to implement a newworkflow, a new payment method.
Of course, if you're selling tocustomers in the US, it's not
going to be the same as Europe.And and so I think one of the
challenges is that you need tofind the technology that can
evolve with your company. And inthe same way, like, no one is
building a CRM.
(15:35):
Just buy, like, eitherSalesforce or HubSpot or, you
know, and you do your kind ofRFP to know what's what's best
for you. I would highlyencourage the finance team to
just kind of, like, try to seewhat are the tools that can that
they can buy so that they cangrow with them towards that
goal. And especially in thiscategory of like how you get
paid by your customers, it'sstill like very nascent
(15:57):
category. Sometimes like we seepeople trying to build instead
of buying, and I think it'susually leading to, terrible
outcomes for, for, for thesefinance teams.
Adam Larson (16:05):
Yeah. It can definitely lead to some terrible
outcomes. So, you know, asyou've as you've observed many
organizations coming andutilizing a better system and
and seeing that and seeing thatbe successful, you know, are
there some, you know, are theresome, I know he said it when
Boris was numbers, but are theresome, like, are there some good
revenue things like, hey, theywere able to get this much
(16:26):
revenue. Like, have you seenthose kinds
Alex Louisy (16:27):
of trends as people implement these solutions?
Absolutely. I think one of theone of the things that is highly
satisfying for those financeteams when it comes to when it
comes to cash collection or whenit comes to how you get paid is
that you can very, very easilymeasure the impact of like any
changes that you implement.Right? So let's say that like
you move 20% of your customerson CH David or cards that you
(16:50):
charge, right?
The impact usually on DSO isjust the drastic impact. Right?
So because suddenly, like all ofthese customers or the vast
majority are going to be chargedexactly on the due date of the
invoice, right? So it's reallyeasy to measure the impact of
such changes, right? But to dothis, you need to first
implement this new paymentmethods, and it's not always
(17:10):
easy.
And then you need to have astrategy to roll this payment
method to your existing or newcustomer base. Right? And I
think that's where the that'swhere we'll we'll really like to
position the the CFO, not as akind of a back office function
where, you know, it's just aboutlike, all right, so here's a
1000 invoices. We now need tocollect it. And then you're
(17:31):
gonna spend like, 2 weeks in aspreadsheet and do some case
application on the, every day,but more trying to have a
holistic approach around, hey,how can I work with the sales
team, for example, to explainthat maybe giving an incentive
for a specific payment methodmakes a lot of sense for us as a
business?
Right? And that's a differentway of like looking at like the
role of the finance teams frommy perspective, because suddenly
(17:53):
like you're front and center inthe upper in the global
operations of the organizationas opposed to being a cat back
office function. So I I thinkyou can definitely see the the
impact we've seen, like, a lotof finance teams are reporting
to the board on the progressthat they've made on such
changes. Whether it's becausethey've saved costs, reduced the
time to get paid, improve thecustomer experience because
(18:16):
that's also super important.There's a lot of things that are
way beyond like just the simpleback office function that no one
really cares about and no one isreally measuring because, you
know, it's just things that weneed to do and it doesn't really
matter.
So, yes, definitely you canmeasure that and and measure the
impact in a very positive way.
Adam Larson (18:34):
That's amazing. And let's dig into a little bit more
about the CFO and their role inthis whole implementing this
technology and how they canimprove their strategy. How you
know, what what does the c whathow can the CFO take their team
from, hey. We're just a bunch ofback office people trying to get
things done to, hey, we're inthe front. We're in the
forefront.
We're part of the strategy.We're getting things moving
(18:54):
forward, and we're reporting tothe board because all the great
things we're doing and being apart of the sales conversations.
Because a lot of times, salesdoes their thing, and then they
say, oh, guys, do this. But howcan we, how can we
Alex Louisy (19:06):
Yeah, absolutely. It's not being an afterthought
and just thinking like, oh, weclosed the deal and then, you
know, we don't know what's gonnahappen. Yeah. As opposed to
being, being like, moretogether. Again, I think it
starts with, like, morevisibility, right?
The visibility on, like, howimportant it is for the
business, you know? When therewas the credit, like, liquidity
crunch in, like, in, like, 2years ago, everyone started
(19:28):
knowing the money was not thatlimited anymore and and the
interest rates started to go up.Suddenly, you know, everyone
realized that, well, there is nofree money anymore. And
sometimes people had 1,000,000sittings on the bank account of
the customers that were not evenchased, right? And so some
companies were literally runningout of cash when there was cash
(19:49):
available that should have beenon the bank account, right?
And it's classified on the onyour balance sheet as an asset,
right? Accounts receivable.Well, it's a great asset, but it
would be even better if we,there would be like this asset
in the form of cash on the bankaccount. Right? So I think that
the finance teams can have thisrole of like explaining how
important it is.
And, you know, I often tell thiskind of like little joke to you,
(20:11):
or it was not a joke, but bythis little story from my
previous job before we startedthe company where I used to work
in a company where as asalesperson, I would sell to
customers, but I would neverknow if they would pay us or
not. And sometimes we would sellto many customers that would
never pay us and no one wasaware. And so closing this loop
where, you know, I'm not talkingabout like flowing back
(20:33):
commissions or, you know, kindof like getting to the next
step, but just simply thisvisibility of saying, well,
these are the best performers,not necessarily in terms of deal
closed, but cash collected. Andhaving this information
available is actually a greatway to bridge the gap between
the sales team and like afinance team, and work together
(20:54):
towards objective. Right now,it's usually when you start
surfacing those numbers, thiswill drive also some changes
into how the business is run.
Typically, like I alwaysremember like, something that
was quite enlightening for mehearing from the CFO of Carta in
the US, Charlie telling me like,well, we've implemented a flow
where whenever you close a deal,the default proposition is that
(21:17):
the customer has to sign an ACHdebit mandate so that we can
charge them whatever an invoiceis going to be due in the
future. Right? And I found thisapproach really interesting
because you suddenly arereversing this approach from,
would you send out an invoiceand we'll let the customers pay
the way they want? So, if theysend a check, well, actually we
take the check. And if they dowire, we do the wire and move
(21:38):
back to the default valueproposition is we're gonna
charge you.
Right? And that's how we work.If literally saying in some
ways, if you're not happy, youcan go and see a competitor. And
it's not necessarily the case,right? Of course, you can make
an exception.
Of course, if like there is abig, if this is a big deal
blocker. But the reality is thatinstead of having 5% of your
(22:00):
customers on direct debit, youmight have 60% of your customers
being charged. And that makes awhole difference. But I think as
a, again, coming back to yourinitial question, it requires
that the CFO and in general, thefinance function is really
business driven and one workshand in hand with the business
team so that you can thenimplement the strategy that
(22:22):
makes more sense for thebusiness. And it's not the other
way around.
If you just come and say, Hey,we know how to do this. It's not
gonna work. So you really needto explain, like, how you do
this and then get the rightprocesses in place so you can
improve the situation.
Adam Larson (22:34):
I think this is just another great example of
how important it is to breakdown the traditional silos
within corporate structure whereit's like, oh, you do your role,
I'll do my role, and we'll sendemails to meet in the middle.
No. We like, we can't have thosedivisions anymore because what
you just described is not howmany organizations work today.
And I think it's hugelyimportant that we have these
conversations and that peoplereally start thinking about it
(22:56):
from that perspective.
Alex Louisy (22:57):
And it requires, I guess, like the involvement from
like the top management and thefounders and, you know, you need
to have that willingness to say,Hey, we need to work together.
Right? There is no point inclosing a deal if you know, this
deal, it never goes live. If thecustomer is not happy and if the
customer is not paying usbecause chances are that, like,
we are a for profit business.Maybe not.
(23:19):
But in general, that's the vastmajority of like what
salespeople do. And there's nottoo much of a profit if, you
know, it ends up never beingpaid. So I think it's, it's
important to have this clearlyas a, as a kind
Adam Larson (23:32):
of a general mindset for the organization as
well. Yeah. That makes, thatmakes a lot of sense. And I
think the other thing is, is,is, is having the finance team,
the finance and accounting teamreally show the numbers. You
know?
They we all know how importantcash flow is. And you mentioned,
like, during the during thepandemic, people left 1,000,000
of dollars in making callsbecause they just didn't bother.
You know, how important it is tokind of create that saying, hey.
(23:54):
Look at our cash flow. Look atwhat we're missing because of
these late name.
This is why we need to do that.
Alex Louisy (23:58):
Yeah. You know, the one of the metrics that we often
have in the kind of like, thetech industry is, you know, like
the kind of like a cashcollection coverage. So you just
kind of like have this verysimple metric around, this is my
monthly recurring revenues, andthis is how much we collected.
Just having your goal that says,Jason LinkedIn talks a lot about
this, but just having a goalthat says, well, on a given
(24:21):
month, we want to collect likemore than a 100 percent, you
know, of our monthly recurringrevenues. And just having this
number that is not necessarilythe only one, but one of the key
targets for the organizationthat sit like in the middle of
the room on like one of thosebig TVs where, you know, you
have all the sales number and,you know, maybe like some of the
product metrics and also havingthis one.
(24:42):
I think for me is superimportant. At least that's what
we have here. I mean, I'mobviously a little biased, but I
think I think like a lot ofcompanies should have this, this
number as objective because ittells a lot as well about the
quality of your your revenues.Right? It's easier to issue an
invoice than actually gettingpaid by customers in some ways.
And it's not necessarily becauseof the technology, but also
(25:03):
because, you know, anyone canissue an invoice, but a customer
will only pay you on time andwill pay you correctly if the
services that you deliver areactually good services, right?
So that's also a point that isvery important. And that's why
also investors are kind of like,very careful about this cash
collection, right? Because ittells
Adam Larson (25:22):
a lot about the quality of your business. It
really does. And we've beensaying since we started, you
know, if you're doing a greatjob and things are going well,
people do want to pay you. Theywant to do business with you,
want to continue. And so ifpeople aren't paying, should you
look back and say, okay.
First of all, is our technologyworking? But second of all, are
we doing a good job that we wantthat people want to pay
Alex Louisy (25:46):
us? Exactly. That's, that's, that's the, the
overall as I think it's actuallyclosing the loop. And from, like
doing business and being paid ispart of this loop. It's not, you
know, it's just one step in thesame way, like sending a quote
or sending out a contract ordelivering the service is also
part of this loop.
But this loop is like theclosing one, and I think we
(26:07):
should pay close attention tothis one.
Adam Larson (26:10):
So when we're looking at, you know, using
technology for B2B payments, isthere a certain payment that
people prefer over other ones?Is there one that you see that
is more effective than others?Like, what have you seen in the
data?
Alex Louisy (26:20):
Yep. So I think that this is really, really
clear and the, the, the reportshowed like a lot of details,
but if I need to summarize, allonline payment method and
specifically payment method thatallow you to charge your
customers are the most effectiveas vendors, right? So it's
really this idea of like, isthis push or pull in the sense
of, as a vendor, am I pullingmoney from my customers? Because
(26:46):
I charge a car, because I chargelike an ACH like mandate. Or am
I waiting for the customers topush money to me?
Right? So that's the other wayaround. And I think whenever you
wait for them to push, it's notthat they don't really want to
pay you, but just think aboutthis, right? I send you an
invoice, Adam, and I say, well,you received this invoice today,
but it's only due in 90 days. Sonow Adam needs to remember or
(27:09):
has a system to just make surethat in 90 days, the payment is
being triggered.
And so many things can happen,right? Of course, you can forget
about it. But if there's anyissue, if there's any additional
validation needed, if, you know,all of the steps make it really,
really unlikely that like on19th day, you're going to just
make that payment exactly on thedue date, right? And so whenever
(27:33):
you have a payment method thatis online, that allows you to
charge your customers, thatmakes it like way, way easier.
Now, what do we often hear from,you know, the market and
specific customers, everyonesays, well, I want to keep
control of my cash flow, so I'mnot going to do that.
Right? But this is exactly sameas for us in the consumer world
(27:53):
when, you know, I have my creditcard on Spotify or Netflix.
Right? The reason why I have mycard there and Netflix can
charge my account every month isbecause I still have control,
not because I control thepayment method, but because I
control the product. Right?
I can go in the product and say,well, I want to come sell my
subscription. Right? So I wouldreally invite people to think
(28:14):
about this in a sense of how canI give customers a possibility
to still retain control whilehaving a payment method on file?
Right? And it's not that easy.
It's like you can do this in aproduct where you say, well, I
have a payment method on file,but I also have an interface
where on a where I can just goand say, I have 5 invoice
outstanding. 4 of them aretotally fine, but this one, I
(28:37):
disagree and I wanna discuss,but, like, not paying that
invoice. Right? If you canprovide them with this interface
where they can control this,then they're way more likely to
give you a way to charge theiraccount. Right?
Because again, as we saidearlier, they wanna pay you.
Right? Because they want theservices. They want a good
relationship. And so what we'veseen in many, many times is for
(28:57):
5% or let's say, like, a, like,a random number, but for 5% of
invoices that I will not want topay because I wanna, you know, I
wanna, raise a claim or I havean issue with this invoice.
Because I don't have thetechnology to do so, for the 95%
others, they are totally fine.I'm still going to use that
legacy payment method that is inthe form of a manual wire
(29:20):
transfer or, you know, that I'mgonna initiate myself. So this
is the thing that we're tryingto kind of like have people
think about is how can I givethem the technology for me as a
vendor to charge them whileleaving them the control?
Because in that case, you have amuch, much better rate. The
other thing that you have withonline that, you know, is often
unnoticed because this is a pureback office function is the cash
(29:43):
application process.
Right? This idea that you needto reconcile a payment with an
invoice, and this is donemanually or with a software,
that is kind of, like, helpingyou doing so is a total nonsense
in 2024. Right? Like, is theresomeone at Amazon just, you
know, matching, like, $9.99 withthe payments that we made? Of
(30:05):
course not.
Right? And this idea that, like,there is a disconnect between
those two objects is from ourperspective does not make any
sense. Right? So if you can alsouse an online payment method
where when the payment is beingtriggered, you know exactly what
is being paid so that you canactually reconcile and write
that back into your system,effectively doing this cash
application automatically. Thenthis is also a big, a big, we've
(30:29):
seen that a lot with hightransaction volumes type of
businesses.
If you have millions oftransaction a month, you have no
other choice. Right? Usually,you have to implement something.
But for people that do, like, a1,000 invoices, you know, we
often see them, like, havingsomeone coming in the office
every day, opening up the bankaccount, opening a DRP, and just
manually doing this before theycan chase. This is also a step
(30:50):
that is often like overlookedthat people should be looking at
because online payments alsobrings this kind of like
capability where you can savetime, reduce errors, and in
general, like improve theefficiency of your business.
Adam Larson (31:04):
Yeah. I mean, that's a big time. You make it
easy for your customers. They'llmove forward. You make it easy
for your back office team.
It it it's a win win on bothsides. You know? And I love
asking you this question topeople, especially organizations
like yourself who are are inthere working within in
technology and trying to seewhat's coming forward. What do
you look at when you're seeingwhen you're looking into the
(31:25):
future? What excites you?
What innovations excite youabout, you know, what's coming
in the future years as you youlook to improve this process
even more?
Alex Louisy (31:33):
Yeah. So I think overall, what is really
exciting, but also, like, quitesurprising is the fact that,
like, we're really, really atthe beginning of the curve.
Right? Still, like, you know,when you think about 40% of the
transaction still done bycheck-in the US, and the vast
majority of this, all of thembeing offline, it's insane,
right? It's 2024.
(31:54):
Everyone is getting excitedabout AI. Like 3 years ago,
everyone was getting excitedabout blockchain, and that's
amazing. But suddenly when yousit in your chair as a finance
person, as you said, you're aconsumer as well. Like you have
an iPhone or like a smartphonein your pocket and everything,
but suddenly having to deal withthese processes is crazy. Right?
And it's nonsense. And very fewpeople realize that, right? So
(32:16):
what I think is exciting is thatthe change is going to occur in
the next couple of years, in thenext couple of decades. There is
no way that, like, we sit herein 2050 and, you know, I'm just
collecting a check-in themailbox, right? So I think this
is exciting that the change ishappening.
And why is this exciting?Because I have a, I have a deep
conviction that like businessesthat will be ahead of the curve,
(32:37):
right? The early adopters oflike this technology will
literally take an advantage overthe competitors in this space,
right? And I think that'ssomething that is important to
you to realize. Now, if I justmove away from just this,
realization of like the currentmarket and where it's going, the
one thing that I find reallyexciting in this kind of change
in B2B payments is the fact thatlike, it's going probably going
(33:00):
to incorporate like the customerexperience and payments is going
to kind of like redefine and bepart of like redefining the
customer experience.
Right? What is what I findreally interesting is that I've
seen heard so many CFOs and somany leaders telling me like,
well, we do everything reallynice, right? When we prospect
customers, when we onboard them,when they sign a contract, when
(33:22):
they use our services, butsuddenly when they have to pay,
they have a miserableexperience. Right? I've heard
that so many times.
And that's true, right? When youget like invoices and you don't
even know what you have to payand it's buried in your inbox,
and then suddenly you get thosehorrible automated email telling
you that you haven't paid.Sometimes you've already paid.
All of that is a miserableexperience, right? And what I
(33:44):
find exciting in this kind oflike upcoming change in B2B
payments is that I reallybelieve that like finance
leaders will start thinkingabout this as well.
This is part of the customerexperience of people interacting
with our company and buying ourservices. Payments will be part
of it, right? And to your pointearlier today on when you were
(34:05):
talking about the role of thefinance teams and not being
siloed and, and everything, whatI find really interesting is
that as a finance leader, I cannow position myself as literally
like same as the marketingperson in some ways and say, we
want to improve the experienceand the brand and the perception
that people have and customershave of our business through
(34:28):
payments. And I think this isreally exciting and really
something that is very differentfrom like the vision that people
had from Bernstein's a couple ofyears ago when this was just all
about like looking at the past,crunching numbers and not really
being part of the business. Ithink this is something that is
really, really interesting toyou to consider and position
ourselves as finance leaderstowards this role rather than a
(34:51):
back office role.
Adam Larson (34:53):
Well, Alex, I just really appreciate your insights
and just thank you again forcoming on the podcast.
Alex Louisy (34:58):
Thank you so much for having me, Adam. It was a
great chatting with you.
Announcer (35:03):
This has been Count Me In, IMA's podcast, providing
you with the latest perspectivesof thought leaders from the
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accounting and financeeducation, visit IMA's website
at www.imanet.org.
Welcome to Count Me In. Today, we're joined by Alex
Louisy, cofounder and CEO ofUpflow, to explore the evolving
b to b payment landscape. Alexhighlights the challenges of
ensuring timely payments and theneed for more modern online
methods that give vendorscontrol while improving the
customer experience. Wediscussed the inefficiencies of
manual payment process, thebenefits of automating invoice
(00:46):
reconciliation, and thecompetitive edge gained from
digital payments. Alex alsostresses the significant impact
of late payments on businessesand offers strategies to
encourage customer adoption ofnew payment methods.
Tune in for actual insights onoptimizing your order to cash
cycle, enhancing departmentcollaboration, and driving
financial success. Alex, I'mreally excited to have you on
(01:15):
the podcast. And today, we'regonna be covering things about
the business, the the b to bpayments in that landscape and,
because you're definitely anexpert in that with your
organization, Upflow. And sojust to start off, what is the
kind of the current state of theb to b payment landscape? And
what trends are you seeingemerge, especially as you're
looking at a lot of data, youwork with a lot of customers,
and it's, it's definitely an upand down, especially with the
(01:37):
way the economy is today.
Alex Louisy (01:39):
Exactly. So first of all, thank you so much, Adam,
for having me today. I thinkwe're very happy to share like,
some of the learnings that we'vehad from working, as you said,
with many, many customers andcompanies trying or actually,
actually getting paid. I thinkthe landscape is quite
interesting because it's movingfast, right? I think that's the
first thing that we would haveto say.
If you look at like all otherindustries, consumer payments,
(01:59):
everything has already shiftedin some ways, but B2B is still
at the very beginning of like ashift. And that would be what I
would say as like the firsttrend that is interesting to
notice is the fact that, like,we're still in the early stage
of like a big shift towardsprobably online payments. Right?
So I think if, if we look atthis report that we're going to
publish on a regular basis, ifyou look at this specific,
(02:21):
session of this episode, thefirst thing that I would say is
that we notice a starkdifference between industries,
right? Whether it's about DSOsor their sales outstanding, how
long does it take you to getpaid?
Or, you know, the kind of likewhat we call the at risk rate in
terms of like the problems thatyou're just never getting paid
by your customers. You can seethat there's a wide difference
per industry, right? Someindustries, typically the
(02:44):
industries are toward liketechnology and subscription
based type of business usuallyhave much better terms in terms
of DSOs and at risk rate thanthe more traditional industries.
So think about manufacturing oranything that is related to
consulting firms. These are likethe worst industries when it
comes to getting paid on time byyour customers.
(03:05):
Right? Under this kind of, like,first, frame of looking at the
the numbers, there's anotherinteresting aspect of it is that
if you look at, like, thetraditional one, the one that
are not performing really well,if you look at, like, one
specific industry, then thevariance is much larger than in
the good industries. Right? Andwhat is interesting there is to
(03:25):
think that, like, yes, sometimesyou're in an industry where on
average, you're not gonna getpaid really fast. But if you
implement the right strategy,you're probably going to be paid
much faster than yourcompetitors or people that are
in the space.
So that would be something thatwe find quite interesting
because I think it tells a lotabout the fact that, like, as a
finance team, there is thingsthat you can do to actually get
(03:46):
paid faster. So that's the firstgeneral trend. The second trend
that we see in general that wethink is fascinating is the fact
that whenever you're using,like, modern payment method and
specifically online paymentmethod, you get paid much, much,
much faster. And that's not aquestion of, like, whether
you're a consulting industry or,the tech industry. This is just
(04:07):
across the board implementingonline payment method and making
the checkout experience for yourcustomers simpler.
Adam Larson (04:15):
Mhmm.
Alex Louisy (04:15):
Accelerates your payment, and that's something
that is really interesting forus to think as finance teams as
well.
Adam Larson (04:22):
That is very interesting because, you know,
obviously we have to get paid tobe able to pay our bills, to be
able to continue running as anorganization. So, that's hugely
important. What kind of impactdoes late pay do late payments
have on organizations? And I'mI'm sure if you if anybody works
in an organization, they seethat impact, but maybe we can
talk about, like, can wequantify that a little bit?
Alex Louisy (04:41):
You know, the first interesting thing is that a lot
of people actually don't see it.Right? There is the statistics
around the fact that, you know,like like probably like like 25%
of business go going bankrupt,go bankrupt because of late
payments. Right? That's like thekind of moment where you see the
reality quite hard, like, andthat's where you see it.
But in general, you know, whenyou talk to finance teams, yes,
(05:03):
it's not perfect. Yes, it takesthem like a lot of time. It's a
headache because they need to goafter unpaid invoices and chase
customers. But when you askthem, can you actually quantify
how much it hurts your business?They can't really give you an
answer.
Right? And I think this issomething that is super
important because we look at itfrom many different angles. But
I think like the most basic onewould be like getting paid late,
(05:26):
and you can put a for anyoneworking in finance, a weighted
average cost of capital on howlong does it take you to
basically bankroll yourcustomers. Money sitting on the
bank account, not on your bankaccount. There's basically
something that you lend money tothem, right, in some ways.
And you can put a dollar valueon this. So that's the first
thing. But that's not the mostobvious one in terms of impacts.
(05:47):
The highest impact that we seeis in invoices are actually
never paid. Right?
And having a clear visibility onthose invoices and the
percentage of your revenue thatyou never collect is something
that is important. Now that'ssomething that we often say is
that sometimes the accountant'sgonna come and just write off
some of your invoices. Right?And this is the moment where you
(06:08):
actually recognize that you arenever going to be paid by your
customers. Yeah.
The point that we have at anoperational level is that
sometimes we see like invoicesare sitting in account
receivable for like more than 6months, 12 months, and maybe did
not reach enough. Maybe youdon't have a notice chart that
comes and say, hey, you have towrite off those invoices. But
the reality is that as anoperator, you know that they're
(06:28):
never gonna be paid. And so Ithink, you know, the approach
that we have at Outflow aroundthis is to say, well, that's how
we define, like, some kind of,like, at risk rate, which means
whether it's been written off ornot, just be mindful of like how
much of these revenues arelikely to never be collected.
And that drive those 2 metrics,drive like very clear dollar
(06:49):
value on a monthly or on ayearly basis that your business
is actually incurring because ofbad management on your accounts
receivable.
Just as a spoiler, this amountis usually way higher than you
think. And I highly encourage,like every finance professional,
to try to think around this.Like we have tools to do this,
(07:09):
but you can do this as well,like with a simple spreadsheet
because it's way, way higherthan what people think.
Adam Larson (07:17):
Yeah, definitely. And I know you have some
specific numbers, so I encourageeverybody to check out the
report. We have a link to your,uploads report in the show notes
just to get all the all thosenumbers that we're we're not
boring you with numbers today,but if you wanna check out all
those specific numbers, pleasedo that. One of the things you
mentioned that, in your firstanswer was about how technology
can kind of with help encouragethose payments and get those
(07:38):
payments come faster. But whenyou and I were first chatting a
few weeks ago, you mentionedsomething about technology
friction.
And I think that's a big part.Technology friction can impact
your late payments intransactions. Can we talk a
little bit about that and maybegive
Alex Louisy (07:50):
some examples? Absolutely. I can give you like,
an example that is not evenabout technology, but if you
just think about like, what isanti technology, which is a
check, right? This is a bigfriction in how you get paid,
right? Like having a piece ofpaper that you put in an
envelope and where you literallyhave to manually like pick it up
in the mailbox and stuff.
(08:11):
Like when you think that it's2024, right, it just doesn't
make any sense. And I think likein general, if I take this
example of checkstyle, like theextreme case, right? But in
general, the order to cash cycleand how you get paid by your
customers in B2B, this idea thatlike you send an invoice as a
PDF, that the person needs todownload it, You know, kind of
(08:34):
like open it, up on the duedate, etcetera, etcetera. All of
these steps are like riddledwith inefficiencies, right? And
the challenge we have forfinance teams is just to realize
that it's not about like tryingto invent like new payment
rails, right?
We're not saying like, youshould put everything on the
blockchain or anything thatseems like totally crazy, but
just like, even likeimplementing card payments or
(08:57):
online payment initiation sothat you know exactly what you
are paying and not having to dolike a kind of a manual cash
application. All of that is nota revolution per se. But problem
is that as a finance team, whenI need to implement that, it's
not that easy, right? Becauseit's accounts receivable. It's
your customers.
You can't really force them asopposed to vendors where it's
(09:20):
easier to tell them like, hey,if you want to get paid, here is
the process. It's, forcustomers, it's a little bit
different. And I think that oneof the things that is very
important is trying to have akind of a global approach on
like how you incentivize yourcustomers to pay with the
payment method that are best foryour business, right, as a
vendor. And this is not easy.This is clearly not easy.
(09:43):
And the challenge that you haveis that it can't happen
overnight. It's an incrementalstep. Let's say that you have a
1,000 customers. And if youthink that like you're going to
wake up tomorrow and say, well,starting now, everyone is paying
by ACH debit and I'm going tocharge you every when the
invoice is due. Of course,you're not going to get it.
Now, the problem is more aroundin terms of the incremental
steps on how you get there andhaving a strategy in mind to
(10:06):
reduce this friction all thetime so that your customers can
pay you, easier. The point thatI would say, Adam, is that, you
know, whenever we talk aboutlate payments, everyone loves to
talk about bad payers. And thereis this feeling that, like, the
only reason why, like, you getpaid late is because there's
only bad payers out there.Right? But if you've built a
business and if everything workswell, right, you usually have a
(10:28):
lot of good payers.
Right? People want to pay you ingeneral. Right? Not, like, 100%,
but most of them won't. Yeah.
And so we really wanna flip thatkind of, like, vision around
late payments to say, hey, howcan I make this experience a
better experience? Becausethat's really what it's all
about. Making this experiencesimpler and faster for everyone,
(10:48):
customers and yourself as avendor.
Adam Larson (10:51):
For sure. I mean, if you make it easier and
faster, people will be willingto pay because there's no
prohibit, prohibitations.Because when you're when you're
trying to they just think aboutas a just a regular b to c
customer. If you're trying tocheck out doing the checkout
process and that you find anychallenge, there's a lot of
probably a large percentage ofpeople unless you really want
that. You're like, I wanna gosomewhere where this is easier.
(11:11):
And so you wanna make that easyfor because because people who
are paying a b to b payment arestill b to c p type people.
Like, they're, they're still acustomer, even though they're a
business and you wanna maketheir, their stuff easy for
them.
Alex Louisy (11:24):
Exactly. It's, it's interesting what you said
because, you know, we often givethis example about like, you
know, marketer thinking aboutlike the conversion on the
website as a funnel. Right? And,you know, you're trying to
optimize every step of thefunnel. And the payment one is a
very important one, right?
If you try to pay and, you know,it doesn't work, then you're
probably going to lose the useror the customer. Right? And very
(11:44):
few people think like this whenit comes to B2B, when they issue
like a 1,000 invoices a month,which means that there is a 1000
payments that are expected tocome into your bank account. And
that reoccurs usually like everymonth. Right?
And so, you can try to thinkabout this, this payment
experience exactly in the sameway as in the consumer world.
And you mentioned the name thatI said earlier around the
(12:05):
checkout page, right? Yeah. Thisdoes not exist in the B2B world
when this is the basis of like,Hey, I want to see what I owe to
this vendor, the list ofoutstanding invoices and a
simple pay now button. How manyB2B invoices are paid like this?
It's really rare. It's gettingto this point where you really
like try to optimize this, thisexperience is really, really
(12:26):
important to be more efficientin how you get paid.
Adam Larson (12:29):
Yeah. And so it's very clear that having the right
technology in place is veryimportant, especially for these
type of transactions. What aresome of the biggest challenges
that organizations face? Becausewhen you think about it, finance
and accounting teams aresometimes the last parts of the
organization to get newtechnology. Part of the reason
is, you know, they're a callcenter, and so a lot of people
(12:50):
see them as a call center.
And so they're like, oh, we'llget to that eventually or, you
know, it's hard to get actuallyimplement projects within the
finance and accounting team. So,what are some of the biggest
challenges that you face,especially when you're trying to
adapt new technologies withinthat organization? And, how
Alex Louisy (13:04):
can we overcome these challenges? Yeah. I think
it first comes down to the thepoint that we mentioned earlier
about measuring. Right? We heara lot of people telling us like,
oh, this is not a priority.
Well, once you realize that,like, you have 1 or 2% of your
annual revenues that are nevercollected, or that you're
experiencing, like, DSOs arelike way higher than the payment
(13:24):
terms are on your invoices andthat it really hurts your
business in terms of workingcapital, then suddenly you can
shift the strategy and say,well, you think that this is not
important, but I can tell youthat this is really important.
Right? The sales people are andrevenues are usually like always
front and center, right? Whenthey close a deal, they gong to
gong, and everyone is having abig feast. But what is happening
(13:46):
if you never collect deals thathas just been closed, right?
That just closed. And so, Ithink it's important to shift
that vision and shift thepriority as a finance leader to
just say, hey, this is the realcost of like what we're talking
about. And that's why this isgoing to become a strategic
project. Right? Now, as yousaid, the finance teams are
(14:08):
usually the last one to justkind of implement the new
technologies and, andeverything.
I think one thing that is superimportant is being in the right
ecosystem. So having the rightERP or finance tool that can
actually grow with your businessand can also enable, like, the
connection with the right toolthat you need. So, you know, if
you need an expense managementsystem, of course, it's easier
(14:29):
if it connects directly to your,accounting system that you've
always been using, etcetera. Sowhich required that you've
chosen the right accountingsystem in the first place. That
that that is something that isimportant.
And then I think there is also,like, a kind of a tendency from,
you know, build versus buy wheresometimes, like, you know, we've
seen some finance teams tryingto get the engineers, get away
(14:51):
from the product. You try tobuild, like, a little payment
module as part of theirexperience, depending on like,
who are your customers. But Ithink this is usually like bound
to failure in the sense of theproduct team is first. It's not
necessarily the job to workinternally for the finance
teams. And then the second thingthat I would say is that this
requires like, you know, kind oflike a lot of dynamic changes
(15:14):
all the time, right?
Because you're going to open anew market with new currencies.
You want to implement a newworkflow, a new payment method.
Of course, if you're selling tocustomers in the US, it's not
going to be the same as Europe.And and so I think one of the
challenges is that you need tofind the technology that can
evolve with your company. And inthe same way, like, no one is
building a CRM.
(15:35):
Just buy, like, eitherSalesforce or HubSpot or, you
know, and you do your kind ofRFP to know what's what's best
for you. I would highlyencourage the finance team to
just kind of, like, try to seewhat are the tools that can that
they can buy so that they cangrow with them towards that
goal. And especially in thiscategory of like how you get
paid by your customers, it'sstill like very nascent
(15:57):
category. Sometimes like we seepeople trying to build instead
of buying, and I think it'susually leading to, terrible
outcomes for, for, for thesefinance teams.
Adam Larson (16:05):
Yeah. It can definitely lead to some terrible
outcomes. So, you know, asyou've as you've observed many
organizations coming andutilizing a better system and
and seeing that and seeing thatbe successful, you know, are
there some, you know, are theresome, I know he said it when
Boris was numbers, but are theresome, like, are there some good
revenue things like, hey, theywere able to get this much
(16:26):
revenue. Like, have you seenthose kinds
Alex Louisy (16:27):
of trends as people implement these solutions?
Absolutely. I think one of theone of the things that is highly
satisfying for those financeteams when it comes to when it
comes to cash collection or whenit comes to how you get paid is
that you can very, very easilymeasure the impact of like any
changes that you implement.Right? So let's say that like
you move 20% of your customerson CH David or cards that you
(16:50):
charge, right?
The impact usually on DSO isjust the drastic impact. Right?
So because suddenly, like all ofthese customers or the vast
majority are going to be chargedexactly on the due date of the
invoice, right? So it's reallyeasy to measure the impact of
such changes, right? But to dothis, you need to first
implement this new paymentmethods, and it's not always
(17:10):
easy.
And then you need to have astrategy to roll this payment
method to your existing or newcustomer base. Right? And I
think that's where the that'swhere we'll we'll really like to
position the the CFO, not as akind of a back office function
where, you know, it's just aboutlike, all right, so here's a
1000 invoices. We now need tocollect it. And then you're
(17:31):
gonna spend like, 2 weeks in aspreadsheet and do some case
application on the, every day,but more trying to have a
holistic approach around, hey,how can I work with the sales
team, for example, to explainthat maybe giving an incentive
for a specific payment methodmakes a lot of sense for us as a
business?
Right? And that's a differentway of like looking at like the
role of the finance teams frommy perspective, because suddenly
(17:53):
like you're front and center inthe upper in the global
operations of the organizationas opposed to being a cat back
office function. So I I thinkyou can definitely see the the
impact we've seen, like, a lotof finance teams are reporting
to the board on the progressthat they've made on such
changes. Whether it's becausethey've saved costs, reduced the
time to get paid, improve thecustomer experience because
(18:16):
that's also super important.There's a lot of things that are
way beyond like just the simpleback office function that no one
really cares about and no one isreally measuring because, you
know, it's just things that weneed to do and it doesn't really
matter.
So, yes, definitely you canmeasure that and and measure the
impact in a very positive way.
Adam Larson (18:34):
That's amazing. And let's dig into a little bit more
about the CFO and their role inthis whole implementing this
technology and how they canimprove their strategy. How you
know, what what does the c whathow can the CFO take their team
from, hey. We're just a bunch ofback office people trying to get
things done to, hey, we're inthe front. We're in the
forefront.
We're part of the strategy.We're getting things moving
(18:54):
forward, and we're reporting tothe board because all the great
things we're doing and being apart of the sales conversations.
Because a lot of times, salesdoes their thing, and then they
say, oh, guys, do this. But howcan we, how can we
Alex Louisy (19:06):
Yeah, absolutely. It's not being an afterthought
and just thinking like, oh, weclosed the deal and then, you
know, we don't know what's gonnahappen. Yeah. As opposed to
being, being like, moretogether. Again, I think it
starts with, like, morevisibility, right?
The visibility on, like, howimportant it is for the
business, you know? When therewas the credit, like, liquidity
crunch in, like, in, like, 2years ago, everyone started
(19:28):
knowing the money was not thatlimited anymore and and the
interest rates started to go up.Suddenly, you know, everyone
realized that, well, there is nofree money anymore. And
sometimes people had 1,000,000sittings on the bank account of
the customers that were not evenchased, right? And so some
companies were literally runningout of cash when there was cash
(19:49):
available that should have beenon the bank account, right?
And it's classified on the onyour balance sheet as an asset,
right? Accounts receivable.Well, it's a great asset, but it
would be even better if we,there would be like this asset
in the form of cash on the bankaccount. Right? So I think that
the finance teams can have thisrole of like explaining how
important it is.
And, you know, I often tell thiskind of like little joke to you,
(20:11):
or it was not a joke, but bythis little story from my
previous job before we startedthe company where I used to work
in a company where as asalesperson, I would sell to
customers, but I would neverknow if they would pay us or
not. And sometimes we would sellto many customers that would
never pay us and no one wasaware. And so closing this loop
where, you know, I'm not talkingabout like flowing back
(20:33):
commissions or, you know, kindof like getting to the next
step, but just simply thisvisibility of saying, well,
these are the best performers,not necessarily in terms of deal
closed, but cash collected. Andhaving this information
available is actually a greatway to bridge the gap between
the sales team and like afinance team, and work together
(20:54):
towards objective. Right now,it's usually when you start
surfacing those numbers, thiswill drive also some changes
into how the business is run.
Typically, like I alwaysremember like, something that
was quite enlightening for mehearing from the CFO of Carta in
the US, Charlie telling me like,well, we've implemented a flow
where whenever you close a deal,the default proposition is that
(21:17):
the customer has to sign an ACHdebit mandate so that we can
charge them whatever an invoiceis going to be due in the
future. Right? And I found thisapproach really interesting
because you suddenly arereversing this approach from,
would you send out an invoiceand we'll let the customers pay
the way they want? So, if theysend a check, well, actually we
take the check. And if they dowire, we do the wire and move
(21:38):
back to the default valueproposition is we're gonna
charge you.
Right? And that's how we work.If literally saying in some
ways, if you're not happy, youcan go and see a competitor. And
it's not necessarily the case,right? Of course, you can make
an exception.
Of course, if like there is abig, if this is a big deal
blocker. But the reality is thatinstead of having 5% of your
(22:00):
customers on direct debit, youmight have 60% of your customers
being charged. And that makes awhole difference. But I think as
a, again, coming back to yourinitial question, it requires
that the CFO and in general, thefinance function is really
business driven and one workshand in hand with the business
team so that you can thenimplement the strategy that
(22:22):
makes more sense for thebusiness. And it's not the other
way around.
If you just come and say, Hey,we know how to do this. It's not
gonna work. So you really needto explain, like, how you do
this and then get the rightprocesses in place so you can
improve the situation.
Adam Larson (22:34):
I think this is just another great example of
how important it is to breakdown the traditional silos
within corporate structure whereit's like, oh, you do your role,
I'll do my role, and we'll sendemails to meet in the middle.
No. We like, we can't have thosedivisions anymore because what
you just described is not howmany organizations work today.
And I think it's hugelyimportant that we have these
conversations and that peoplereally start thinking about it
(22:56):
from that perspective.
Alex Louisy (22:57):
And it requires, I guess, like the involvement from
like the top management and thefounders and, you know, you need
to have that willingness to say,Hey, we need to work together.
Right? There is no point inclosing a deal if you know, this
deal, it never goes live. If thecustomer is not happy and if the
customer is not paying usbecause chances are that, like,
we are a for profit business.Maybe not.
(23:19):
But in general, that's the vastmajority of like what
salespeople do. And there's nottoo much of a profit if, you
know, it ends up never beingpaid. So I think it's, it's
important to have this clearlyas a, as a kind
Adam Larson (23:32):
of a general mindset for the organization as
well. Yeah. That makes, thatmakes a lot of sense. And I
think the other thing is, is,is, is having the finance team,
the finance and accounting teamreally show the numbers. You
know?
They we all know how importantcash flow is. And you mentioned,
like, during the during thepandemic, people left 1,000,000
of dollars in making callsbecause they just didn't bother.
You know, how important it is tokind of create that saying, hey.
(23:54):
Look at our cash flow. Look atwhat we're missing because of
these late name.
This is why we need to do that.
Alex Louisy (23:58):
Yeah. You know, the one of the metrics that we often
have in the kind of like, thetech industry is, you know, like
the kind of like a cashcollection coverage. So you just
kind of like have this verysimple metric around, this is my
monthly recurring revenues, andthis is how much we collected.
Just having your goal that says,Jason LinkedIn talks a lot about
this, but just having a goalthat says, well, on a given
(24:21):
month, we want to collect likemore than a 100 percent, you
know, of our monthly recurringrevenues. And just having this
number that is not necessarilythe only one, but one of the key
targets for the organizationthat sit like in the middle of
the room on like one of thosebig TVs where, you know, you
have all the sales number and,you know, maybe like some of the
product metrics and also havingthis one.
(24:42):
I think for me is superimportant. At least that's what
we have here. I mean, I'mobviously a little biased, but I
think I think like a lot ofcompanies should have this, this
number as objective because ittells a lot as well about the
quality of your your revenues.Right? It's easier to issue an
invoice than actually gettingpaid by customers in some ways.
And it's not necessarily becauseof the technology, but also
(25:03):
because, you know, anyone canissue an invoice, but a customer
will only pay you on time andwill pay you correctly if the
services that you deliver areactually good services, right?
So that's also a point that isvery important. And that's why
also investors are kind of like,very careful about this cash
collection, right? Because ittells
Adam Larson (25:22):
a lot about the quality of your business. It
really does. And we've beensaying since we started, you
know, if you're doing a greatjob and things are going well,
people do want to pay you. Theywant to do business with you,
want to continue. And so ifpeople aren't paying, should you
look back and say, okay.
First of all, is our technologyworking? But second of all, are
we doing a good job that we wantthat people want to pay
Alex Louisy (25:46):
us? Exactly. That's, that's, that's the, the
overall as I think it's actuallyclosing the loop. And from, like
doing business and being paid ispart of this loop. It's not, you
know, it's just one step in thesame way, like sending a quote
or sending out a contract ordelivering the service is also
part of this loop.
But this loop is like theclosing one, and I think we
(26:07):
should pay close attention tothis one.
Adam Larson (26:10):
So when we're looking at, you know, using
technology for B2B payments, isthere a certain payment that
people prefer over other ones?Is there one that you see that
is more effective than others?Like, what have you seen in the
data?
Alex Louisy (26:20):
Yep. So I think that this is really, really
clear and the, the, the reportshowed like a lot of details,
but if I need to summarize, allonline payment method and
specifically payment method thatallow you to charge your
customers are the most effectiveas vendors, right? So it's
really this idea of like, isthis push or pull in the sense
of, as a vendor, am I pullingmoney from my customers? Because
(26:46):
I charge a car, because I chargelike an ACH like mandate. Or am
I waiting for the customers topush money to me?
Right? So that's the other wayaround. And I think whenever you
wait for them to push, it's notthat they don't really want to
pay you, but just think aboutthis, right? I send you an
invoice, Adam, and I say, well,you received this invoice today,
but it's only due in 90 days. Sonow Adam needs to remember or
(27:09):
has a system to just make surethat in 90 days, the payment is
being triggered.
And so many things can happen,right? Of course, you can forget
about it. But if there's anyissue, if there's any additional
validation needed, if, you know,all of the steps make it really,
really unlikely that like on19th day, you're going to just
make that payment exactly on thedue date, right? And so whenever
(27:33):
you have a payment method thatis online, that allows you to
charge your customers, thatmakes it like way, way easier.
Now, what do we often hear from,you know, the market and
specific customers, everyonesays, well, I want to keep
control of my cash flow, so I'mnot going to do that.
Right? But this is exactly sameas for us in the consumer world
(27:53):
when, you know, I have my creditcard on Spotify or Netflix.
Right? The reason why I have mycard there and Netflix can
charge my account every month isbecause I still have control,
not because I control thepayment method, but because I
control the product. Right?
I can go in the product and say,well, I want to come sell my
subscription. Right? So I wouldreally invite people to think
(28:14):
about this in a sense of how canI give customers a possibility
to still retain control whilehaving a payment method on file?
Right? And it's not that easy.
It's like you can do this in aproduct where you say, well, I
have a payment method on file,but I also have an interface
where on a where I can just goand say, I have 5 invoice
outstanding. 4 of them aretotally fine, but this one, I
(28:37):
disagree and I wanna discuss,but, like, not paying that
invoice. Right? If you canprovide them with this interface
where they can control this,then they're way more likely to
give you a way to charge theiraccount. Right?
Because again, as we saidearlier, they wanna pay you.
Right? Because they want theservices. They want a good
relationship. And so what we'veseen in many, many times is for
(28:57):
5% or let's say, like, a, like,a random number, but for 5% of
invoices that I will not want topay because I wanna, you know, I
wanna, raise a claim or I havean issue with this invoice.
Because I don't have thetechnology to do so, for the 95%
others, they are totally fine.I'm still going to use that
legacy payment method that is inthe form of a manual wire
(29:20):
transfer or, you know, that I'mgonna initiate myself. So this
is the thing that we're tryingto kind of like have people
think about is how can I givethem the technology for me as a
vendor to charge them whileleaving them the control?
Because in that case, you have amuch, much better rate. The
other thing that you have withonline that, you know, is often
unnoticed because this is a pureback office function is the cash
(29:43):
application process.
Right? This idea that you needto reconcile a payment with an
invoice, and this is donemanually or with a software,
that is kind of, like, helpingyou doing so is a total nonsense
in 2024. Right? Like, is theresomeone at Amazon just, you
know, matching, like, $9.99 withthe payments that we made? Of
(30:05):
course not.
Right? And this idea that, like,there is a disconnect between
those two objects is from ourperspective does not make any
sense. Right? So if you can alsouse an online payment method
where when the payment is beingtriggered, you know exactly what
is being paid so that you canactually reconcile and write
that back into your system,effectively doing this cash
application automatically. Thenthis is also a big, a big, we've
(30:29):
seen that a lot with hightransaction volumes type of
businesses.
If you have millions oftransaction a month, you have no
other choice. Right? Usually,you have to implement something.
But for people that do, like, a1,000 invoices, you know, we
often see them, like, havingsomeone coming in the office
every day, opening up the bankaccount, opening a DRP, and just
manually doing this before theycan chase. This is also a step
(30:50):
that is often like overlookedthat people should be looking at
because online payments alsobrings this kind of like
capability where you can savetime, reduce errors, and in
general, like improve theefficiency of your business.
Adam Larson (31:04):
Yeah. I mean, that's a big time. You make it
easy for your customers. They'llmove forward. You make it easy
for your back office team.
It it it's a win win on bothsides. You know? And I love
asking you this question topeople, especially organizations
like yourself who are are inthere working within in
technology and trying to seewhat's coming forward. What do
you look at when you're seeingwhen you're looking into the
(31:25):
future? What excites you?
What innovations excite youabout, you know, what's coming
in the future years as you youlook to improve this process
even more?
Alex Louisy (31:33):
Yeah. So I think overall, what is really
exciting, but also, like, quitesurprising is the fact that,
like, we're really, really atthe beginning of the curve.
Right? Still, like, you know,when you think about 40% of the
transaction still done bycheck-in the US, and the vast
majority of this, all of thembeing offline, it's insane,
right? It's 2024.
(31:54):
Everyone is getting excitedabout AI. Like 3 years ago,
everyone was getting excitedabout blockchain, and that's
amazing. But suddenly when yousit in your chair as a finance
person, as you said, you're aconsumer as well. Like you have
an iPhone or like a smartphonein your pocket and everything,
but suddenly having to deal withthese processes is crazy. Right?
And it's nonsense. And very fewpeople realize that, right? So
(32:16):
what I think is exciting is thatthe change is going to occur in
the next couple of years, in thenext couple of decades. There is
no way that, like, we sit herein 2050 and, you know, I'm just
collecting a check-in themailbox, right? So I think this
is exciting that the change ishappening.
And why is this exciting?Because I have a, I have a deep
conviction that like businessesthat will be ahead of the curve,
(32:37):
right? The early adopters oflike this technology will
literally take an advantage overthe competitors in this space,
right? And I think that'ssomething that is important to
you to realize. Now, if I justmove away from just this,
realization of like the currentmarket and where it's going, the
one thing that I find reallyexciting in this kind of change
in B2B payments is the fact thatlike, it's going probably going
(33:00):
to incorporate like the customerexperience and payments is going
to kind of like redefine and bepart of like redefining the
customer experience.
Right? What is what I findreally interesting is that I've
seen heard so many CFOs and somany leaders telling me like,
well, we do everything reallynice, right? When we prospect
customers, when we onboard them,when they sign a contract, when
(33:22):
they use our services, butsuddenly when they have to pay,
they have a miserableexperience. Right? I've heard
that so many times.
And that's true, right? When youget like invoices and you don't
even know what you have to payand it's buried in your inbox,
and then suddenly you get thosehorrible automated email telling
you that you haven't paid.Sometimes you've already paid.
All of that is a miserableexperience, right? And what I
(33:44):
find exciting in this kind oflike upcoming change in B2B
payments is that I reallybelieve that like finance
leaders will start thinkingabout this as well.
This is part of the customerexperience of people interacting
with our company and buying ourservices. Payments will be part
of it, right? And to your pointearlier today on when you were
(34:05):
talking about the role of thefinance teams and not being
siloed and, and everything, whatI find really interesting is
that as a finance leader, I cannow position myself as literally
like same as the marketingperson in some ways and say, we
want to improve the experienceand the brand and the perception
that people have and customershave of our business through
(34:28):
payments. And I think this isreally exciting and really
something that is very differentfrom like the vision that people
had from Bernstein's a couple ofyears ago when this was just all
about like looking at the past,crunching numbers and not really
being part of the business. Ithink this is something that is
really, really interesting toyou to consider and position
ourselves as finance leaderstowards this role rather than a
(34:51):
back office role.
Adam Larson (34:53):
Well, Alex, I just really appreciate your insights
and just thank you again forcoming on the podcast.
Alex Louisy (34:58):
Thank you so much for having me, Adam. It was a
great chatting with you.
Announcer (35:03):
This has been Count Me In, IMA's podcast, providing
you with the latest perspectivesof thought leaders from the
accounting and financeprofession. If you like what you
heard and you'd like to becounted in for more relevant
accounting and financeeducation, visit IMA's website
at www.imanet.org.
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