Business to Business (B2B) transactions are anything but an easy process for SMEs. Normally, transactions made and entered between two companies require extensive documentation and more often than not, costly fund transfers. Either or both of these requirements often cause payment remittance delays, which in return affect the company’s overall operational efficiency. But here’s the silver lining: with the advent of financial technology (FinTech) innovations in the Philippines, this issue will no longer be a concern soon. In fact, we’re already seeing the impact of technology on financial transactions as we speak. According to Rajan Narayan of BPC Banking Technologies, a company that provides shared retail payments business transformation solutions to FinTech players, “there is a significant shift in the region to cashless and transparent payments initiatives.”
One of the ways in which Philippine B2B companies are seen to benefit from FinTech innovation is in payments solutions. Electronic cash transfers between companies pave the way to operational efficiency simply by speeding up financial transactions.
When businesses have digital payment options, transactions are more secure, safe, reliable, and accurate. Less manpower is needed to sort and manage a company’s finances. Also payments are no longer processed manually, making B2B payments easier and faster, and ultimately opening more opportunities for growth to local business owners.
FinTech companies in the Philippines are beginning to emerge as a response to the complexities of B2B financial transactions, which often delay payments and thus slow down the pace of business operations.
In the past, when businesses transact with another business, they would have to follow a tedious process which typically includes manual efforts to remit payment. With innovative FinTech solutions and the emergence of FinTech startups which offer automated payment services, businesses have found a way to speed up B2B financial transactions sans the need to purchase their own Enterprise Resource Planning (ERP) software.
FinTech startups offer payment automation to accelerate B2B financial transactions and create a seamless payment process at reduced costs. Going beyond automated accounts payable and receivable functions, these startups also offer invoice financing, purchase order financing, and online lending.
Invoice financing was designed to reduce cash cycles for businesses (the time between sending an invoice and receiving payment) and as such, it has become an important financing option for business owners (especially the SMEs).
Business owners who are expecting future cash payments from pending invoices can easily benefit from invoice financing by using their cash receivables to cover business expenses. By sending their pending invoice to a third party FinTech startup, they can receive cash in advance and use it to pay their expenses on time.
The main benefit of invoice financing is that it gives business owners a quick and hassle-free way to get the cash owed to them in advance. Before invoice financing, business owners are left to take financing options that are less suitable for their situation, like bank loans—which take time to get approved and have significantly more loan documentation requirements.
Hence, if business owners need to access their incoming cash urgently to address current expenses and keep their operations running smoothly, invoice financing is an excellent option. With invoice financing, the FinTech company you’re seeking financing with will insist on reasonable measures to ensure repayment of the cash advance, but with a much simpler and faster process. They give attention to verifying the invoice and the reliability of the transaction instead of the heavy personal financial documentation.
Purchase Order Financing (PO Financing) is another notable financing option offered by FinTech startups for SME owners who are looking to serve more clients. In events where small businesses receive a significantly bigger order from clients, the natural tendency is to decline the opportunity—especially when it can affect your monthly cash flow.
But with PO financing, small businesses can accommodate these large orders by using their purchase orders to get additional funds for these projects. They will have the financial means to buy materials from their suppliers and hire more workers, allowing them to deliver the needs of their clients and at the same time, continuously grow the capabilities of their business.
Purchase order financing allows business owners to accept bigger projects even if they might not yet have the required business capital for it. Business owners who have no knowledge about PO financing either turn to traditional loans or turn down these projects.
While there’s nothing wrong with turning down client orders for the right reasons, rejecting clients are considered as missed opportunities and doing this more often than usual can ultimately lead to the spread of negative feedback about your operational capabilities. If left unresolved, this issue could escalate and strain your existing client relationships.
Recognising the value of increased working capital for SME growth, some FinTech startups have begun offering online lending services. Digital financing is a way to add to a company’s capital without making the borrowing process too difficult and time-consuming. Before, companies that need additional funding would run to banks and traditional lending companies because these are the only options available. With the help of FinTech startups providing quicker and more streamlined financing services, business owners are given more convenient options with the use of various digital platforms.
First Circle is one of the leading companies in the Philippines that offer Invoice Financing and Purchase Order financing to cover a company’s short-term capital gaps. First Circle makes it easy for local business owners to apply for financing through a simpler and faster online business financing process. This allows business owners to receive cash by simply registering to the First Circle portal, submitting the supporting documents online, and completing the application. The entire application process from the submission of the required documents, verification, and the approval can be as fast as 5 days, considering requirements are submitted on time.
B2B companies are privy to a lot of exciting developments in digital financial services. The opportunities are here and with all the recent FinTech breakthroughs we are experiencing, we are definitely on the right track in pursuing them.
Digital transformation, at least for B2B companies, is within your reach. Are you making the most out of these opportunities? Experience the perks of financial technology through online financing. Click here to apply for PO financing and Invoice financing.