Buy now, pay later for Accounting fees? We ask “why not?”

Buy now, pay later for Accounting fees? We ask “why not?”

Are you prepared to make a difference to your clients and your firm?

I guess that’s a bold and provocative statement but not one made lightly. I’m sure most, if not all, accountants would emphatically cry YES. The unfortunate reality is that many firms have fantastic intentions however when confronted with the opportunity, busy just gets in the way and it becomes easier to not make a decision.

If you are looking for a way to make a huge difference to your firm and your clients in 2018 maybe now is the perfect time to rethink your approach and capitalise on the Social Proof (see the Wikipedia link here) that the next generation of “Buy Now, Pay Later” (BNPL) providers have created.

As the dust settles on yet another festive season, the commentary is rapidly expanding around the prevalence and impact of the various BNPL options that are now available for consumers. BNPL is seeing a resurgence as the model is “re-imagined” through companies like AfterPay and Zip Money. The new breed of BNPL solutions are a great addition for many retailers and are creating a purchasing option for the generation of non-credit card holding shoppers as well as the many that are weaning themselves off the revolving debt roundabout. The really big story on all of this though is the retail uplift that BNPL solutions bring. Yes, there will be further commentary (though not here today) on the “evils” of debt to fund consumerism however the latest BNPL providers bring responsible lending practices to protect the consumer from themselves including low limits and, of course, a structured repayment plan.


So why is this important to Accountants?

The rise in acceptance and usage of BNPL solutions presents an opportunity for accountants to help their business clients accelerate access to advice and support (and accelerate growth for their business) while also supporting the growth aspirations of the firm. We believe any firm can deliver a step change in growth (like retailers are experiencing) by offering their clients a structured repayment option that better matches the specific cashflow situation of the business.

If you’re keen to understand why this works read on….


 Why does BNPL work so well?

In our assessment of the various options presented to a purchaser we see a number of key characteristics that drive the buyer toward a BNPL option:

  • Offered at point of sale alongside traditional options (both in person and online)
  • Application process is simple
  • Goods can be taken immediately
  • Small additional cost for the service/convenience
  • Structured repayment plan with direct debit – Instalments work better than a credit card as they feel that they can manage a repayment plan vs having an “open” debt

So here’s THE question – how can accountants leverage this for the good of their firm and their clients?

It’s not a big stretch to translate the concept of BNPL to a business to business (B2B) environment. SmartFee has been doing this for some time however labelling fee funding as a BNPL solution has somehow been missed in the commentary to date.

Leveraging payment solutions in B2B has been around for a long time – business credit cards and purchasing card solutions have been in the market since at least the early 2000’s however these options have generally had limited flexibility, a short repayment cycle and a high cost if not paid in full within the terms.

We also know business owner behaviours follow the well-trodden path of consumer behaviours (after all business owners are consumers as well). Like consumers, business cashflow is tight and very few have the luxury of spare working capital to drive the level of business growth they would like to have (or can see as the potential for their business).

Importantly, the need for support from professional advisors is stronger than ever. The latest SME research from Bstar (download our infographic here) shows that:

  • 98% believe there are opportunities to grow their business
  • 87% identified an immediate need for growth planning
  • 79% want solutions to help them grow their business and its value
  • 69% have a trusted advisor, many have never discussed their business concerns with them (perhaps because of limited payment options?)

So business owners want help (tick);

Accountants have the expertise (tick); and

Business owners may not have the working capital to get the advice they need now (tick)!

Tying this together – a BNPL solution that helps the business purchase the advice they need with cashflow seems logical to us (and it’s our business and expertise).

Need convincing? Read on for a deeper look at the behavioural aspects and address why a BNPL option for professional fees is a good thing for your clients and your firm:


The Psychology

The psychology behind BNPL specifically addresses a fundamental barrier to purchase – financial consequence.

BNPL removes one of the key elements of friction in a purchase decision (consuming working capital) plus there’s a hidden benefit which we often see at SmartFee – accelerated purchasing (i.e. asking for more advice/support, more often) creating greater client stickiness and higher revenue per client for the firm – in fact over 30% of loans at SmartFee are to repeat borrowers – a clear indication to us that this is working!

BNPL, or in the case of businesses maybe we should call this “Advice Now, Pay with Cashflow”, also changes the conversation in your clients head (called rationalisation)


“this is important to my business…I don’t have the cash…this isn’t THAT important right now”


“this is important to my business…I can pay with cashflow…I wonder what else I should be looking at with my accountant?”

BNPL can change your own internal dialogue as well – suddenly you can present new solutions to your clients with the confidence that there’s an option for them to fund with cashflow. How often are your clients missing out on advice (and you on revenue) because you have convinced yourself that they won’t buy? BNPL may provide you with an avenue to change the dialogue completely.


The numbers

Cash is king as the saying goes. The truth for most SMEs though is that cash flow is king and the opportunity cost of capital is a key metric to monitor.

We completed an assessment on the options available to business owners to fund their accounting fees. We have assumed that the advice they are seeking is both new advice to the client and a new service/engagement from the firm with an invoiced fee of $10,000. We make the further assumption that the advice will actually deliver financial benefit to the business beyond the opportunity cost of capital i.e. there’s a tangible/measurable ROI.


What’s the options and impact to your client?

The table below shows the various components of an unsecured borrowing arrangement for $10,000 through the key funding provider groups available to business owners. This is based on the information available from a number of websites from providers in each category as at January 15, 2017. The below is derived from a sample of options. We do encourage you to do your own research on the best options for your clients (unless you are happy to take our word for it!).

The above is based on an unsecured facility which is an important consideration. Many business owners today don’t have real property as a form of security and even those that do may prefer to have an unsecured facility so as not to impact their existing arrangements.

Some of you will say that your firm has addressed the funding option by charging your clients a monthly subscription – sure that works and, managed well, creates stickiness and loyalty as the monthly fee serves as a reminder to the client to ensure they are getting value from you. The monthly fee approach typically addresses the “run-rate” services provided HOWEVER it’s not an option for the project/event based work often required to drive a step change in your engagement with your client.

Some of you will say that you could offer BNPL at no cost to the client (i.e. you are the funder) – that’s true also. The question to address is the opportunity cost to you/the firm of funding your clients and your expertise in risk management.

Ultimately the most appropriate option for sourcing the funds to pay accounting and legal fees is often determined by the client themselves. It is important though that their professional advisor is able to guide them on the implications of the various options.


Why aren’t more accounting firms doing this?

We believe that a key reason for accounting and legal firms not leveraging fee funding is tied to a perception that fee funding is high risk to the firm. Fee funding has traditionally been promoted by the majority of providers as a debtor management solution. Yes, fee funding can be used to manage debtors however, if that’s the core focus then you’d expect higher risk and some poor results. More importantly, this position highlights the collection inadequacies of a firm which is something that many just didn’t want to address/acknowledge.  The approach to funding “slow payers” has also lead to a number of situations where accountants have been required to pay the fee funder back under their recourse arrangements. Not pleasant for all concerned for sure and the opportunity to address the real growth opportunity is being missed completely.

Another concern we often hear is ”my clients just won’t borrow to pay our fees”. No matter where they get the money from they are borrowing to pay your fees – the issue is that often they get a free loan from the firm because they are offered very favourable terms (did you just say pay me when you feel like it?) – yes, you are the bank! And worst of all, very few accounting firms do credit checks on their clients or have formal debtor management/collection procedures in place to ensure that debtors stay on track all the time.

Flipping the conversation to leverage fee funding for growth just makes sense. This is where we see firms having the greater success. Yes, recourse for non-payment exists however we believe that a combination of responsible lending practices, appropriate credit checks and robust/proactive credit management dilute the risk of default significantly. Focussing on providing a fee funding solution for your good/growth clients means ultimately they grow and you grow. While you may be thinking that your good clients always pay on time, ask yourself what else they could do with you if they could access more of you more often? What if the cash they use to pay you on time was injected into their business for growth? We do find that often the best paying clients of firms are the best candidates for fee funding – they understand the opportunity cost of capital and they value their advisor (that’s why they always pay on time!).


Is growth a priority?

With BNPL hitting a peak in visibility and adoption NOW is the best time to consider this as a payment option for you and your clients.

We know business owners that leverage SmartFee appreciate the option. We know that over 30% of what we lend today is from repeat borrowers. We know that BNPL is again part of the buying behaviour for all consumers. Your choice is to decide how much you want to help your clients grow and where growth in 2018 sits as a priority for your firm.

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