How Technology Can End the Late Payment Crisis Costing UK Businesses £11 Billion

[00:00:00] - [Speaker 0]
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[00:00:46] - [Speaker 0]
This is a topic that I wanted to explore today because late payments are costing The UK economy alone almost 11,000,000,000 a year. But behind those numbers is a technology problem that is hiding in plain sight. And my guest today is Pat Birmingham. He's the founder and CEO of Appflex, and he's joining me today to explain how outdated payment infrastructure and disconnected systems are all contributing to the problem. But as you all know, I'm a solutions not problems kinda guy, so I wanna learn more about how virtual commercial cards, APIs, and straight through processing can help automate the movement of money, give buyers access to working capital, and get suppliers paid faster.

[00:01:37] - [Speaker 0]
And if we've got time, I also wanted to discuss why regulation, how that can change the rules. But technology could be what finally changes the way businesses actually pay. But as this is a tech podcast, technology, could it be what finally changes the way businesses actually pay each other. So if you or your business have had problems with late payments and looking for different solutions, this is a conversation you can't miss. And with that scene perfectly set, let me introduce you to my guest right now.

[00:02:10] - [Speaker 0]
So thank you for joining me on the podcast today. Can you tell everyone listening a little about who you are and what you do?

[00:02:17] - [Speaker 1]
Yes. My name is Pat Birmingham. I'm the founder and CEO of Adflex. What we do is we we kind of specialize in b to b payments in the kind of more larger sector companies. But, you know, we kind of cover really across the board because in today's world, electronic commerce has made everything so much easier and faster apart from payments of course which is I guess what we're gonna be talking about.

[00:02:48] - [Speaker 0]
Yeah. Well, thank you so much for joining me because one of the things I try and do on here every single day is tackle a different problem and talk about why it's having such an impact on businesses and also the role of technology and solutions out there. And late payments cost The UK economy billions and contribute to thousands of business closures every single year. So I've got to ask, why has such a damaging problem been allowed to become just a a normal part of doing business? It seems like we've kind of accept that it's a little bit rubbish, right?

[00:03:21] - [Speaker 1]
The real problem is the obviously the margins are so low and you know and and financing the the whole process is is problematic. So therefore they use suppliers as a kind of a source of finance and that's that's the real problem. And it has to kind of the only way we're gonna really change that is the, you know, something drastic happens at the top which then we can then come in. Companies like us can come in and suggest ways around it. Not not how to circumvent the rules, but how to get how to plug the gap in the your finance line of credit.

[00:04:03] - [Speaker 0]
Of course, the government, they're proposing stronger enforcement, mandatory reporting, and greater board level accountability. But how much difference do you think these measures will make? Where do you think regulation alone will will still fall short?

[00:04:19] - [Speaker 1]
Well, we've already been introduced to this through the the fair payment code and also before that the prompt payment code and those those were voluntary schemes and it was just to kind of coax people into accepting that this is gonna be a thing later on so let's practice it now before it becomes mandatory. I mean I've looked at it and I'm following it and I know that we've got a House of Lords reading in the next few days I think sometime in July 21 I think from what I can remember. So this will kind of bring it to one step closer to in a legislation and and there's gonna be a whole industry built up on top of that of managing, imposing it, placing it. So yeah, it it's gonna be interesting times over the next year or so.

[00:05:10] - [Speaker 0]
And late payments is something that impacts businesses of all sizes in every industry. But in industries such as construction, which you mentioned at the beginning of our, conversation there, late payments can become an informal financing mechanism of sorts where larger businesses will protect their own cash flow at the expense of their smaller suppliers. So how do we address this imbalance without creating some of those unintended consequences elsewhere down the supply chain?

[00:05:39] - [Speaker 1]
Well I guess the real problem is not I guess the effects we're seeing is as a kind of, as a result of it's been done like this, this is how it works for years and years, the margins are low, know finance is always a problem is to try to improve the way companies are financed when they do these very large projects and well even some kind of mid range projects really. If this is where kind of cards come in which I can talk about later, which give a line of credit. So it allows the buyer to pay their suppliers quicker, be compliant with the code, at the same time maintain a a line of credit, which is the in very simple terms, that's that's what it's all about.

[00:06:27] - [Speaker 0]
And before you join me on the show today, I was reading and doing a little research on you and I was wondering how you've argued that changing the rules is far easier than changing business behavior. So what is it that prevents companies from paying suppliers promptly today, and how much of the problem comes down to maybe outdated processes, workflows, and and payment infrastructure? What's the big cause of this?

[00:06:50] - [Speaker 1]
Like I say before, it it basically is of in built, it's baked into a lot of businesses that you know, you fund it through this kind of late payment of suppliers which is very detrimental because there's a lot of suppliers that go bust. There's about 38 a day currently and this isn't really a sustainable model. And I think we try to address it not on the legislation side because that will be run obviously by the government and their agents to kind of enforce it and to fine and to make sure it happens but to make it easier for companies, buyers especially to kind of work on a better way of funding their supply chain finance. Yeah and one factor here is that when you're dealing with very large companies, often they've grown through acquisition. So what that means is their systems become a little bit disjointed and payments become slower because they haven't got one uniform system or process to do it.

[00:07:54] - [Speaker 1]
So when you couple that together with the you know the inefficiencies of of working today in modern day businesses which are still relatively inefficient compared to what they could be and this has an impact on late payments. So some late payments are deliberate you know as a way of creating this extended credit but others are kind of more accidental or kind of just down to inefficiencies of all these loosely coupled systems.

[00:08:26] - [Speaker 0]
And technology such as virtual commercial cards that you mentioned a few moments ago and straight through processing can all make payments faster and more predictable. But how do all these technologies work in practice? And what are the the business benefits that they can create both for buyers and suppliers? Love to learn more about how the the difference that technology can make here.

[00:08:48] - [Speaker 1]
Yeah. Well, there's two things here really and I think the first thing to be fair because STP, there's probably a lot of people saying what the hell is STP? Straight through processing. In in very simple terms, it means that the buyer can pay the supplier using like a card as a line of finance but without the supplier having to accept and process the card which is a very big friction point normally. So in simple terms the buyer will use a process like Adflex that is able to issue a card for a payment and then automatically process it on behalf of the supplier.

[00:09:29] - [Speaker 1]
So therefore the buyer has full control when the payment gets made. They also get an added benefit of some additional enhanced data like invoice data as well. So it helps in the reconciliation and and plus the big one is they get a line of finance from the card companies which is typically sixty days but can be more which is quite a cheap way of financing the whole process.

[00:09:57] - [Speaker 0]
And I think with many finance leaders focusing on extending their payment terms, as you mentioned, they had to improve their working capital. Is it is there a better way for people listening and companies to strengthen their own cash position when without simply transferring financial pressure onto some of those smaller suppliers?

[00:10:16] - [Speaker 1]
Yes, it's looking. Mean traditionally, you know, overdraft has been a way of doing it but that's got a quite a significant cost associated with that. Whereas using another alternative finance method using purchasing cards, now these are not these are kind of very similar to, you know, your everyday card you have in your wallet. But in in the b to b world that I kind of operate in, we use cards not so much for convenience to walk into a place and pay for something. We we use the card rails and the finance terms that are offered by the card companies.

[00:10:55] - [Speaker 1]
So they they can, you know, the cards can be used to make very large payments up to you know a few million pound on a single card transaction potentially. So it takes away all the friction from having to kind of shoehorn a card into where a previously a bank, kind of bank to bank system that was funded by a bank overdraft. So what what we're doing here is replacing the bank overdraft and the bank to bank payment with a card which kind of seamlessly fits in between that using the kind of software that does that. And then basically the payment instruction comes from the buyer, that payment instruction we accept it as an automated request that gets paid to the supplier very quickly within a few hours or maybe a couple of days at the worst. So the buyer has made the payment, they can then move on, they've got the line of finance and everybody's happy.

[00:11:56] - [Speaker 0]
And aside from the technology and improving working capital, there's also the small matter of regulation and for businesses and people listening that that wanna try and get ahead of some of the proposed regulation rather than treating it as yet another compliance exercise. Any practical changes that finance and procurement leaders listening could be making there?

[00:12:18] - [Speaker 1]
Yes. I think I'm gonna sidetrack a little bit here because there is a perception of cards being expensive. And also people think of cards, especially in the public sector, as something that is mainly used for travel and entertainment. But because we've working with the banks, we've repurposed cards to become a more of a kind of a financial instrument that can be used in a direct replacement for a bank transfer payment. So that's one thing that we have to do is educate buyers.

[00:12:53] - [Speaker 1]
Look this really is a good way of doing it. Let us explain how it works. Because we are personally agnostic, we're not owned by any of the banks, we can give them of free advice that is agnostic and it's not biased towards a particular bank. So we try to build up that trust And the other thing is once a buyer buys into, excuse the pun, the card program, it kind of propagates across their supplier network because they see the benefits of using a card to pay a supplier in this new way and then they try to convince other suppliers to accept it as well. This is where I don't think companies can do that on their own and that's where they need companies like us to help them because we understand the, you know, that this, you know, all the moving parts of the system, we can make it as frictionless as as possible.

[00:13:51] - [Speaker 0]
It's phenomenal what you're doing here and everything that you've you've done and what has led you to this path as well. And I'm gonna have a bit of fun with you because I always do a little research on my guests and find out more about their origin story. And, man, do you have a a great backstory? Because I learned that you began your career as a music producer before spending more than three decades in b two b payments. I've got to ask, what what did witnessing technology transform the music industry teach you about maybe changing established business practices, and how has that influenced the way you've built AdFlex?

[00:14:25] - [Speaker 0]
There's gotta be a big, big story here and a lot of lessons learned, but tell me more about that.

[00:14:30] - [Speaker 1]
There is, but I wasn't a very successful one. So that that's the problem. I I decided at at the end of that process to I need to have a life changing career moment. So here I am thirty years later on that. But what had this the kind of synergy or the similarities between a technology driven business, there's not a lot of difference really because music is all about orchestration.

[00:14:56] - [Speaker 1]
It's about laying down tracks on tape, not digital, let's say, and then resequencing all these and mixing them into a tune, then going delivering that tune across to people that wanna buy it. There's not a lot of difference there between payments really when you think about it because, you know, a payment in order to make a payment, it has to kind of follow a sequence effectively. It has to be mixed. It has to be accountable, someone's got to count and reconcile that payment. In my day, I mean I'm going back to the late seventies really, in order to record a band you either had to go to a studio or you'd have to buy very expensive equipment and it was mostly done on tape, very expensive tape, know, everything from four track, eight track, 16 track, 24 track.

[00:15:47] - [Speaker 1]
But in my time during the late seventies, early eighties, we saw a transition to digital tape, know DAT which kind of later became the kind of preferred way of backing up data and also you know the introduction of CDs which replaced vinyl, Well kind of replaced vinyl because vinyl is coming back and cassettes and things like this. So the similarity really is that nowadays if you're gonna record yourself, it's super cheap to do it. But that's the problem. There's so many people doing it. You're in a a marketplace that is very difficult to monetize.

[00:16:26] - [Speaker 1]
So to draw the parallel with card payments, when we when we started doing this a long time ago, it was very expensive to process cards and payments. Nowadays it's much much cheaper. Therefore the fintech revolution came along and started to upend the banks you know with people like you know, Starling, Monzo and Revolut, you know, who need no introduction, where it became a lot easier to do this.

[00:16:54] - [Speaker 0]
I was gonna say, there there are so many synergies here. If we look at the music industry, you've seen so many big changes as have I, from vinyl to cassette to CD, mini disc, if anyone remembers that, m p three streaming. The world of the Internet has gone from what? The the Internet arrived in the, late nineties, then the cloud, mobile, digital disruption, now AI. Payments has been on a whole journey now from those big clunky machines to, mobile payments that we do now, tap and go.

[00:17:26] - [Speaker 0]
There's so many big changes here. I've got to ask for, you've been on this journey for a long time. You've seen so many changes, seen so many cycles. What what excites you about the future especially with the introduction of AI and agents, etcetera?

[00:17:40] - [Speaker 1]
What excites me is doing something difficult really. That's always been our driver. I mean the people we kind of you know employ, we kind of we're a little bit different to the mindset of a normal company where we're trying to dumb everything down. We have highly specialized people who understand how this whole process works. AI can help a little bit with that, but knowing how to use AI is the trick.

[00:18:07] - [Speaker 1]
A lot of people don't really know how to use it, and I think the the changes that are going along are very very exciting and the first time you ever use AI to create an email, you think, wow, this is fantastic. But then after a while you realize that you're becoming, you know, less personal. You're your personality. The customers then realize that as well. So the kind of the the circle is kind of turning now into dealing with people again where AI is just in the background doing its stuff.

[00:18:38] - [Speaker 1]
It's not replacing the people. And but but doing that it it still interests us because it is difficult. It is technology and it is making it work, making it simple for everybody else. That's kind of what we do.

[00:18:54] - [Speaker 0]
Yeah. Such a great point. And late payments currently cost The UK economy alone almost 11,000,000,000 a year and for force, I think you said, 38 businesses to close daily. That's 14,000 businesses a year and over 1,500,000 businesses affected, and that's just in The UK struggling with staff wasting an estimated, I think, 133,000,000. So many big talking points there.

[00:19:21] - [Speaker 0]
And for anyone listening who wants to find out more information about what you do at AdFlex, the kind of announcements that'll be coming out throughout the year, get in touch with you or your team or follow you, etcetera. Where would you like me to point everyone listening?

[00:19:34] - [Speaker 1]
I mean if you just search for Adflex, you'll find us. We're all over the web. We are adflex.co.uk. On LinkedIn, reach out to any of my team who are very active on LinkedIn. We'd love to hear from you.

[00:19:48] - [Speaker 1]
Like I say, we we we employ people, not bots. So the conversation is is always of interest to us on how we can help you.

[00:19:58] - [Speaker 0]
Well, as I said a few moments ago, staff are wasting an estimated a hundred and thirty three million hours chasing overdue payments. If anything that we've talked about today resonates with people listening, I urge you check out the show notes. I'll include links to everything that you mentioned at the website and your LinkedIn, and, we'll try and keep this conversation going and maybe finally rise up and not just accept that this is a normal, process of, doing business because it doesn't have to be. The technology is there, but thank you for raising this today. Really appreciate your time.

[00:20:29] - [Speaker 1]
Well, you're welcome. It's been, good good to talk to you as well, actually. Enjoyed it.

[00:20:33] - [Speaker 0]
I think today's conversation showed that late payments isn't simply about companies refusing to pay on time. Sometimes the technology itself is getting in the way. But Pat explained how businesses built through years of acquisitions can end up with disconnected systems and inefficient payment workflows. Well, smaller suppliers, they're the ones waiting for money, larger buyers look for ways to protect their own cash flow. There's a huge disconnect here.

[00:21:02] - [Speaker 0]
But technologies such as virtual commercial cards, straight through processing, all these things can offer a different approach. And using digital payment rails and automation can help suppliers receive their money sooner, but it also gives buyers more flexibility over their working capital. And I also loved hearing more about Pat's backstory now. His first career in music where digital technology transformed an expensive and complicated process and ultimately made it far more accessible. And perhaps b two b payments are overdue their own version of a similar transformation.

[00:21:43] - [Speaker 0]
But I'd love to hear your thoughts. If the technology already exists to make business payments faster and make them more predictable, why are so many companies still operating like it's 1995? Let me know. Techtalksnetwork.com. Let's keep this conversation going.

[00:22:02] - [Speaker 0]
Let's be the change that we wanna see in the world. Let's see what we can do there. As I said, check out AdFlex. I'll put all the links in the blog post associated with this at techtalksnetwork, but I'm afraid I've eaten into far too much of your day already. So time for me to go now, and I'll speak with you again.

[00:22:18] - [Speaker 0]
Same time, same place tomorrow. Bye for now.