The 4-instalment 'buy now, pay later' purchase option for the 'goods' sector, introduced several years ago, has proven to be very popular in smoothing payments and converting additional sales in various countries, including Australia, where some of the large international players, like Afterpay, originated.
There's no doubting that a portion of a 'fee for service' business's clientele will find the ability to get 'service now, pay later' over 4 interest-free monthly instalments, will likewise welcome the opportunity. (some 60% of small to medium business, as well as large businesses, use 10-month instalment Insurance Premium Funding to smooth their annual premium payments.)
It will also appeal to service providers, as many businesses start to recover from the impact of Covid-19.
For accountancy firms, legal practices, IT support providers & the like, there's also a great opportunity to introduce this new instalment payment service to their clients, who can, in turn, also sign up their clients and benefit from improved cashflow and new business opportunities.
Importantly, there's no lock-in contracts; no monthly fees; no special hardware or software required; and no client credit checks or pre-approvals.
We're certain there's a value added 'win/win' for all.
Click on the questions to open the collapsible content.
The Tax Invoice must predominately be a 'fee' for a service*, like accountants; solicitors; financial advisers; architects; IT consultants; interior designers; furniture removalists; advertising; marketing; automobile service; equipment maintenance; utilities; cleaners; painters; recruiters; travel agents; dentists; and numerous other 'fee for service' businesses. (*the Tax Invoice can include part 'goods', e.g., IT tech repairing a computer that needs a few new bits or a furniture removalist supplying packaging material or an auto mechanic using new car parts, etc.)
This offering isn't where the Tax Invoice is primarily for 'physical' products, like office furniture; computer equipment; indoor plants; artwork; etc. (If an office furniture supplier has a purchase, deliver & assemble order, the client could receive 2 tax invoices - separate the 'delivery & assembly' invoice and allow clients to use the 4-instalment option.)
The service provider completes an online Membership Agreement, which includes providing contact and bank account details.
Once processed, the business will receive a 'Welcome' email from the funder with a unique link to the funder's portal, which is then provided to clients to access the instalment payment offering.
Clients will log in using the unique link; key in their details; and nominate a credit card to pay the 4 monthly instalments.
Once processed, 100% of the Tax Invoice amount will be sent by EFT to the service provider's nominated bank account within 2 business days.
The service provider needs to sign up 2 clients within 30 days after receiving online access to avoid the funder's once only $275 set-up fee.
The 'funding fee' is 4.99%* of the Tax Invoice owed by the client.
The 'funding fee' is applied to all Tax Invoices funded during any given month and charged to and collected from the service provider after month end.
Payment only via credit card. Debit cards and bank accounts can't be used.
If the Tax Invoice is $2,200 (incl. GST), the funder will 'reserve' $2,200 against the client's credit card limit (similar to what numerous service providers currently do). They will then take the 1st $550 instalment which will appear on their next statement and the credit card reserve drops to $1,650; 2nd month, to $1,100; 3rd month, to $550; and 4th month, to zero.
- Service provider sends Tax Invoice to client along with the firm's 'unique code'
- Client accesses funder's website using the 'unique code'; inserts the Tax Invoice details and amount; and their credit card details
- The client pays the 1.5% merchant fee
- Funder reserves 100% of the Tax Invoice amount & charges 25% to their credit card
- 25% will appear on the next credit card statement received by the client
- Funder pays the service provider 100% of the Tax Invoice by EFT within 2 business days
- Funder recovers the 'funding fee' (see above) after end of month
- The subsequent 3 monthly instalments (3 x 25%) will be charged and appear on the client's future credit card statements.
So long as the client's credit card limit can accommodate the 'reserve' amount (see comment in previous two question), as often as they like.
ASX listed Quick Fee (ASX:QFE). QFE's focus, prior to this new instalment offering, is 'fee funding' to a number of professional service sectors, primarily accountancy firms, in Australia and the USA. QFE has funded over $250m in fees from 2 partner suburban firms right through to the Big 4 accountancy firms.
QFE has partnered with 'BNPL' provider, Splitit (ASX:SPT), to deliver this new offering.
In difference to 'fee funding', there's no 'recourse' against the service provider, if their client defaults on one or more instalment payments.
The founding partner of FFA was co-originator of the 'Fee Funding' offering launched in 2007 and has been an authorised introducer of fee funding since.