Relay's vision is eliminate late payments by using cashback to encourage businesses to pay their invoices promptly. Our unique approach flips the traditional trade credit model on its head by asking businesses to pay invoices as soon as they are approved rather than waiting until the due date.
With over $15B of invoices held up awaiting payment in NZ every month, many small businesses find themselves short of cash and are forced to take on short-term debt to fill the gap before their invoices get paid.
Relay founder and CEO Michael McFadden (previously Head of Innovation at Paymark) says it's time that trade credit practices joined the 21st century.
"It's crazy that small businesses are taking on debt to fill a cashflow gap when the invoice has already been approved and the cash is sitting in the customers' bank account not earning any interest. We believe that if the job has been done and the invoice is approved, the supplier should be paid the same day. Everything we do is about making that possible."
Our platform allows buyers and suppliers to price the time value of money into every invoice so that instead of paying interest to a bank to bridge any cashflow gaps, suppliers can use that money to incentivise their customers to pay early. The fee suppliers pay for this is typically far less than the cost of borrowing with the added benefit of removing the hassle and headaches caused by late payments. Suppliers indicate when they want to get paid and choose how much they are willing to spend on prompt payment. When the buyer pays early they receive an instant cashback payment from Relay - the earlier they pay, the more cashback they earn.
"Buyers often have money in the bank that's set aside to pay supplier invoices later in the month. With interest rates still so low, being able to earn a return on that cash by helping out your suppliers with their cashflow creates a win-win for both sides."
Icehouse Ventures partner, Barnaby Marshall agrees.
“Icehouse Ventures have been supporters of Relay since day one. We love the vision Michael and the Relay team have to optimise business payments. There has been plenty of innovation around consumer payments in the past decade but we are yet to see a step change in technology or approach in business payments. There are still high degrees of manual approvals and slow payment times. We believe Relay could significantly shift how companies approach payments.”
After launching last year, McFadden found that many businesses simply don't have the systems in place to process and approve invoices faster even if they want to.
"When Covid hit, I spoke to a lot of CFOs who wanted to help out suppliers with early payments but found they just didn't have the systems in place to get invoices processed and paid any faster."
Most invoices are sent out today via email as PDF files but often the details still need to be manually entered into different systems in order to get approved and paid. Unsurprisingly these processes are error prone and can lead to long delays in invoice payments. Our platform includes accounts payable automation technology to help eliminate this manual work so that supplier payments can be fully automated and funds released the same day as approval.
Businesses using Relay get real-time visibility of which invoices have been approved and scheduled for payment. This means suppliers, often small businesses, are not left wondering when cash is coming through the door and can request early payment if they need it. Since launching late in 2020, we have helped improve cashflow for hundreds of small businesses and are now processing millions in early payments every month. McFadden says Relay plans to use the new funding to expand into Australia.
"The payments landscape in Australia is quite different with much longer payment terms the norm and strong demand for early payments. It's an immense opportunity."