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How Parakeet uses BPAY APIs to help SMEs receive payments on time

31 May 2022 - By Collaborative Media & Publishing (BPAY)

(Please note - original article from BPAY group can be found here)

CEO of Parakeet Charles Wong worked as a banker for 16 years, providing working capital finance to companies waiting for their invoices to get paid.

“One of the things I realised was we probably didn't need to lend a lot of this money if things were done properly – if your invoices were paid earlier,” he says.

“That got me thinking about how we could solve this issue because there's a lot of products out there now that help you chase invoices by having email reminders. And it's not working because the problem's still there – people are still paying late.”

He and Parakeet co-founder Rob Owens hit on the idea of incentivising people to pay their bills early using discounting for prompt payment. Users of Parakeet can build a discount into their invoices, which decreases as time passes.

A discount of around 5% is typically enough to encourage early payment, says Wong.

“The earlier you pay, the more you should be rewarded. It's a behavioural shift we're trying to drive,” he says.

Almost a third of invoices paid late

Slow payments are a significant problem for Australian small and medium-sized enterprises (SMEs). Last year the government launched an online Payment Times Reports Register to publish information about the payment policies of businesses with a turnover of more than $100 million.

“While it’s still early days, the register reveals that more than 30% of invoices are being paid late by big business for what has already been earned by small business. That’s incredibly disappointing,” Australian Small Business and Family Enterprise Ombudsman Bruce Billson said last November.

“According to the Register, average payment terms are sitting at 37 days – when 30 days is the maximum time any small business should be waiting for their invoice to be paid, and some leading larger businesses are committing to pay small business suppliers within a week,” added Bilson.

Parakeet is working on the problem of late bill payments from the other side of the transaction as well.

“One reason why people pay late is because it's actually hard to pay the bills. This is why we focus on the invoicing – which is the receivables, and the payables – which is the paying of the bills,” Wong says.

Parakeet have partnered with cloud accounting program Xero and BPAY to make bill payment as seamless as possible.

“We felt that for us to simplify the bills payment, we needed to make sure we got BPAY in there. BPAY is a great product because it is consistent and reduces fraud,” adds Wong.

Automatic bill reconciliation

When businesses receive a bill, they email it to Xero which then uses optical character recognition, or OCR, to load the bill details into the accounting application.

The business owner then approves the bill payment, Parakeet creates a batch file with the billing information, and pays the bills via BPAY on the due date. When there is only one bill, Parakeet will pay it individually.

Once the bill is paid, Parakeet reconciles it and closes it out in Xero so the business owner or accountant doesn’t have to look after it.

Parakeet’s value is that it connects with Xero and then uses the BPAY APIs to validate billing information for payment via BPAY. The connection process only took two weeks, Wong said.

Parakeet is one of an increasing number of businesses linking up with BPAY via APIs. HelpPay, an app that allows consumers to help family and friends with bill payments, also uses BPAY APIs, as does fintech Hnry, an invoicing and tax calculation app that helps the self-employed manage their finances.

Published by BPAY Pty Ltd (ABN 69 079 137 518) email: The BPAY Scheme is managed by BPAY Pty Limited. When you use BPAY payment products, the BPAY Scheme is paid fees relating to processing costs and BPAY Scheme membership. Contact your financial institution to see if it offers BPAY payment products and to get the Product Disclosure Statement. Any financial product advice provided by BPAY Pty Limited in relation to BPAY payment products is general advice only and has been prepared without taking into account your objectives, financial situation or needs. Before acting on such advice, you should review the Product Disclosure.


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