At Danske Bank, we have been working for some time to solve this problem, focusing on optimising cooperation between small businesses and their largest customers. The result is the DynamicPay solution, which offers a simple and easy overview of payments coming in from a business’ customers and allows early payment of invoices against a cash discount.
Get paid straight away against a discount
DynamicPay is an online service, which automatically shows future payments coming in to a business and offers an early payment option. If, for example, a carpenter awaits payment of DKK 200,000 from a large insurance company, the carpenter can see the invoice and the scheduled payment date once the insurance company has authorised payment of the invoice. The carpenter can then opt to receive the payment ahead of the payment date against giving a cash discount.
“DynamicPay is an egg of Columbus for small businesses as well as their customers,” says Lars Sjögren, head of Transaction Banking at Danske Bank. “The solution provides the small business with an immediate overview of its future cash flow and access to new liquidity. The large customer strengthens its suppliers, automates the dialogue about invoice processing and gets a cash discount that results in lower costs.”
Late payment a major issue for small businesses
The need for solutions such as DynamicPay is brought to light by a brand new survey conducted by Epinion on behalf of Danske Bank. The survey shows that long payment deadlines are a key obstacle to ensuring that Danish businesses in the 2-249 employees category have the liquidity they need.
- 65% find, to a varying degree, that business customers pay later than agreed
- More than one in every five (22%) often or sometimes have cash flow problems as a result of business customers having long payment deadlines
- More than one in ten (13%) often or sometimes miss out on new projects or spend unnecessary time as a result of business customers having long payment deadlines
Figures from the European Payment Report back this conclusion. Late payment is a major socio-economic problem across Europe:
- Outstanding debt in the form of late payments to small businesses totals EUR 360 billion
- Some 40% of small businesses say that customers’ inability to pay on time prevent them from growing and from taking in new orders
- About one third consider late payments a threat to long-term survival
- One fourth consider layoffs on an ongoing basis as a result of late payment
“Of course DynamicPay cannot solve all the problems,” says Lars Sjögren. “But we are pleased to have pioneered a solution that may be used world-wide. Initially, though, we will focus on the Nordic countries.”