Digitising trade terms in 2023

Cashflow is king for business but it’s often under siege by archaic trade terms. Now, Shift Trade is helping Australian businesses provide terms that benefit their cashflow – and customers.

Cashflow has been a pain point for businesses of all sizes across various industries throughout history.

Fast forward to today and Australian businesses wait anywhere from seven to 60 days for customers to pay and are often chasing late payments beyond their terms.

Cashflow cycles don’t often align between a supplier and their customers. Cashflow gaps mean suppliers can struggle to pay ongoing expenses and other essential business costs.

It also means businesses are essentially acting as Australia’s fifth-largest bank, with Shift research showing businesses are providing an estimated $1.3 trillion annually in trade credit. Most businesses don’t have the infrastructure, technology, cashflow or resources to act as finance providers or manage complex credit programs.

I’ll pay you next week

Current trade terms often leave suppliers exposed, taking on the credit risk for customers while waiting for payments tied up in accounts receivable. Time, money, and staff hours are also wasted chasing invoices and dealing with manual, paper-based applications, and customer onboarding processes. According to a recent International Accounting Bulletin report, when monthly expenses continually exceed revenue, it can create significant risks for business owners including:

mounting unpaid bills, including wages
staff layoffs
dipping into personal savings and equity
potential business failure.

The situation is compounded by the assumption businesses will automatically provide these age-old trade programs – because that’s the way it’s always been done. This is particularly unsustainable for business owners struggling in the current financial landscape.

Another side effect of this expectation is that some businesses simply choose not to offer terms. This results in limited growth by driving potential customers to other suppliers who do offer terms.

The case for disruption

The trade-credit system is well overdue for disruption. Technological innovation has transformed supply chain ordering systems, invoicing, inventory, and delivery, but until recently, has eluded business trade terms.

Shift, a provider of credit and payment platforms to Australian businesses, has made inroads towards solving the conjoined issues of credit and payments with Shift Trade, a low-friction, single-point solution that offers:

Fast customer onboarding

Replacing outdated and paper-based application processes

Upfront payment

Never chase another outstanding invoice while Shift manages the credit risk

Scalability

Offering all customers access to a trade account with flexible payment terms

Closing the gap in cashflow cycles

Easily embedded, the Shift Trade platform can help break the cycle of lagging time between accounts payable and receivable by offering flexible payment options without the business carrying the weight of lengthy payment terms that stifle cash flow.

Businesses making trade terms work for them in 2023

Hospitality, construction and FMCG are some of the first industries moving away from the traditional model of having cash tied up in lengthy payment cycles.

It’s a logical move when you consider Shift Business Index data from December 2022 that shows cafes spend around 58 per cent of their expenses on supplier costs while trying to grow, find staff and manage their business.

For example, a coffee roaster might sell thousands of kilos of beans a week on 14 or 30-day payment terms, which means they don’t see any of the funds for up to a month. And that’s on the proviso their customer pays on time.

The resulting cashflow issues create stress and background noise that can deplete reserve funds needed for the unexpected and inhibit growth.

The idea is that both parties can get on board easily, the transactions are simple, and the platform streamlines processes, so the supplier and their customers can get on with business. Once set up, it encourages repeat business and takes away the stress of unpaid invoices,” says Shift’s Supplier Sales Director, Paul Barker.

How does it work?

Shift Trade takes care of the complexities of negotiating terms, setting payment limits, and managing payments, enabling suppliers to easily manage their customer trade accounts while getting paid upfront.

The platform easily adapts as customers trade needs change over time.

It gives customers the flexibility to extend payments, pay their invoice in full and request credit limit increases, all online via the Shift Trade platform.

Suppliers save time on administration and managing accounts, so they’re free to run their business while giving all customers an easy-to-use trade account to manage supplier invoices.