Invoice Financing Made Easier

Basware Advance seeks to keep SME owners on top of their invoices and help them get funding when needed. Here’s why the CEO sees technology as a key to efficient financing.

To a small or midsized business, cash flow is one of the most important metrics of financial health, more important than the vaunted top and bottom lines.

One key component to managing cash flow comes with managing the invoices that flow in and out of a business, and in some cases, getting an invoice paid early — even by a third party — is what can make or break a month, a quarter or even an enterprise’s very existence.

Enter Basware. The eInvoicing network has been around for a few decades, processing roughly $500 billion in annual spend across its network, and now has branched out into supplier-initiated financing via the cloud.

In an interview with PYMNTS, Esa Tihilä, the company’s CEO, said that SMEs can struggle with the timing of receivables, which in turn impacts the entire business. One way Basware steps in to alleviate this pain point is through Basware Advance, which is debuting in the United Kingdom early next year and elsewhere in Europe thereafter. Advance has been honed through market research focused on the process of receiving financing and also the desires that SMEs harbor in pursuit of such financing.

Key among those desires, said Tihilä, remains a steadfast interest in privacy, one that tends to be shunted aside in the traditional methodologies where SMEs come to banks or other lenders in an effort to keep the cash flow cycle optimized. “Freedom is key,” said Tihilä, and business owners are not always eager to share the most minute details of their financial positions just to secure short-term (and, in some cases, very short-term) bridge financing. “At least in Europe,” he added, “we see that as much as 50 percent of the segmentation that comes to traditional financing, which fails them, is SMEs. Working capital management is hard, and it’s not predictable.” That extends to invoices — tracking them, getting them paid and paying them, too.

To that end, said the CEO, Advance takes as a key driver an effort to improve transparency in the invoice financing process across buyers and suppliers, giving them early financing when needed, and a key salve in cash flow management. The service comes from the joint efforts of Basware and Arrowgrass Capital Partners, which formed Virtaus, geared toward smart financing. The user base that already exists on Basware’s eCommerce platform can now work with Basware Advance, which Tihilä called “a nice add-on to our financial product” and can extend across the network of more than 1 million businesses across 100 countries.

Key features through Advance include the ability to track invoices while they are making their way toward being paid and the ability to upload details related to the financing that they are looking to finalize. In terms of matching lenders and borrowers, Tihilä noted that the data that is sent across the portal and the platform are secured through encryption, and the advantage is that lending is an autonomous process, with agreements and dashboards taking the place of the process that might be seen with banks and other financing vehicles, where, the executive said, “data is uploaded to a bank, the documents are separated and then farmed out to an army of people.”

All other types of data show information relevant to transactions, stemming from the commerce network, said Tihilä, with millions of invoices. “We know who is the buyer, the supplier, what they ordered and what was delivered,” said Tihilä.