International invoicing, Flywire’s Mike Massaro told Karen Webster in a recent conversation, is not easy work – though from the outset, it isn’t obvious just how complicated it is.
Massaro noted that – particularly in their early days of getting their cross-border bearings – businesses often think they can sidestep the complexity by doing all of their invoicing in U.S. dollars to a buyer anywhere in the world.
It’s a solution that never lasts for all that long.
“The rationale is that they don’t know foreign currency, but they know how to do U.S. dollars,” Massaro told Webster, adding that they are often forced by the market to make an exception, or are dealing with a much larger buyer who is immovable on the subject of accepting anything but payment in their local currency.
And in Flywire’s experience, what happens once, Massaro noted, happens over and over again. Once a firm is forced to deal with that exception and get serious about attaining global scale, the reality sets in that they are increasingly less able to do business only in greenbacks. And then, Massaro said, they are faced with the prospect of setting up accounts receivable teams all over the world, customizing the process for different verticals and very likely having to set up a patchwork of different banking relationships to address the needs of the buyers they will be paying.
They may also need to build specialized treasury products, and will absolutely have to make sure that every dollar, yen, yuan, euro, rupee, shekel, ruble and peso being paid is compliant with local regulation.
And, of course, they need to make sure they are being paid the right amount, which is harder than one might think when there are multiple invoices, all of which have to pass through various payments intermediaries (all with associated fees) on their journey from buyers who may or may not have actually paid their invoice correctly or in full.
Large businesses, Massaro noted, can take all of this in stride, because they have sufficient resources to throw at all of these problems and can build in-house capabilities.
“But there is a huge gap between those Fortune 500 firms and all the businesses in the world with global needs,” Massaro explained. “And for us, that was the realization that the receivables network we created could be leveraged to create a solution for buyers with global payments needs.”
So, they built one – and after six months in beta, Flywire ended last week with the announcement that global invoicing will now be part of its global receivables platform. The goal, according to Massaro, is to provide an invoicing service that dramatically streamlines the billing process for companies being paid by suppliers outside their home country.
Lifting a Burden
Adding global to the growth equation of a domestic firm, Massaro noted, should be viewed as a massive opportunity.
But for many medium-size product and manufacturing firms in the U.S., it looks much more like a “daunting burden.” These companies aren’t the mom-and-pop shops, either, Massaro said, but rather multi-million dollar businesses that have demand for their services on a global scale, but struggle to meet that demand when it comes to billing and receiving payments. Some of these firms work with large regional banks that they like and have relationships with, but that don’t have a global presence, nor do they want a relationship with one that does.
To meet this global demand, these firms tend to default to creating jerry-rigged one-offs that aren’t flexible or scalable.
Hearing these stories sparked the motivation to create an end-to-end solution for suppliers that avoids the hassle of having to establish banking relationships all over the world. Using the global receivables platform, a supplier can, for no additional cost, let Flywire manage the flow, collections and delivery of funds once they are invoiced. Suppliers can be assured that “good, clean funds are coming in from various countries of origin,” and that those funds will be in the right amount after the currency conversions.
More than that management, though, Massaro noted, these suppliers also getting visibility into their invoices. Using data tools, the platform also organizes the data so they can see what they are receiving in a variety of ways. Suppliers can look at the individual customers, of course, but they can also see their invoice data parsed more broadly, regionally or sub-regionally.
That granular view is important to businesses, Massaro pointed out, because it lets them customize their interactions according to the customs and business practices of local buyers. In some regions, customers need more reminders, or need to be reminded of upcoming bills in specific ways. The Flywire invoicing platform also includes the ability to send messaging in local languages to ensure clear communications.
The Tipping Point
Entering into invoicing, Massaro noted, reminds him a bit of Flywire’s early days entering education and healthcare. Then, when presenting their cross-border payments solution, they heard the same consistent theme from the colleges and universities with whom they spoke.
“‘Well, we get paid eventually.’ We heard that a lot,” Massaro noted.
That may be okay when you’re Harvard or MIT or Stanford, but not if you’re a ten-million-dollar supplier of equipment to buyers in a couple of countries around the world. Those businesses reach a tipping point where the road to getting paid “eventually” becomes much too expensive and onerous. And they realize they are losing more opportunities to grow the scale of their business globally by doing the tedious work of chasing down what’s due to them.
“Suppliers get to the point where they can’t take it anymore,” Massaro noted, “and realize there has to be a better way of getting paid. Our goal is to be that better way.”