Entrepreneurs are prepared for a world where no one buys their product and they go out of business. Somewhat harder to accept is a world where ones product is bought, and they still go out of business because the 30, 60 or even 90 day corporate pay-out cycle left them without enough cash flow to keep the doors open.
It is a big problem. Worldwide, $2 trillion in payments are locked up in late payments, according to a report by Insurance News Net.
That is the problem that Danish entrepreneur Christian Lanng thinks he can solve.
Lanng was the youngest government division head in Denmark’s history, a post he used to develop an electronic invoicing system for the government’s 25,000-plus suppliers’ 15 million invoices every year.
By 2009, 95 percent of the Danish governments’ suppliers were off of paper using his Cloud-based system.
Lanng has returned to his entrepreneurial roots—he started his first company when he was 19– with Tradeshift. The company is his attempt to bring his cloud-base e-invoicing approach to the private sector.
Tradeshift gives buyers and suppliers options. Dynamic discounting allows suppliers to negotiate a lower price in return for earlier payments. Third-party financing allows the supplier to be paid immediately by a third-party financer that the buyer can then pay back (generally at a lower interest rate than the supplier could hope to get financing against their invoice) over 60 days.
“It’s true that big companies can save a lot of money by delaying payments,” Lanng told Business Insider. “But they’re also hurting themselves because suppliers could go out of business while waiting for payment. Companies could save up to $30 million a year easily, just by paying earlier.”
Although other companies offer similar services, Tradeshift argues that it is different in that it is free for suppliers using the platform.
Tradeshift is expanding rapidly. Three years after launch, the company has 500,000 clients worldwide, including Dell, DHL, and the U.K.’s National Health Service. In the last 18 months, it has grown 300 percent, processed $50 billion in transactions, been valued at $300 million and raised $150 million in funding.
“People always ask if I’m going to sell to SAP and I (jokingly) tell them, ‘No, I’m going to buy SAP,'” Lanng said. “We think this is the future of big businesses.”