Net terms are a staple in B2B payments. While the concept is intended to aid in better control over cash flow – especially for buyers – in the construction industry, “net terms” doesn’t necessarily mean what it implies.

For contractors who need to purchase materials from suppliers, payment practices typically include a monthly deadline within which all outstanding invoices are due, regardless of whether the invoices were issued 30 days or three days prior to that due date.

According to Yaser Masoudnia, CEO of LinqPal, which was launched last month, this old B2B payment framework is just one example of the variety of old payment flows that the construction industry relies on. As he told PYMNTS, outdated and manual processes cannot solve the biggest problems for both material suppliers and contractor buyers, leaving plenty of room for friction and cash flow bottlenecks.

Bilateral pain points

When introducing LinqPal, Masoudnia said he wanted to address both buyer and supplier vulnerabilities in the build space, with companies on both ends having more in common than they might initially think.

“On the one hand, it is designed to meet the needs of the contractor and, on the other hand, it is designed to meet the needs of the suppliers, since the root of the problem is the same for both,” he said.

For example, the continued tradition of a monthly payment deadline creates significant cash flow and administrative burdens for the contractor customer, who Masoudnia found often misses these deadlines because they are so busy. Letting go of a chunk of capital in a day each month can also lead to cash flow problems.

But that framework also adds points of friction for the supplier, he said, pointing to the challenge of tracking multiple outstanding invoices from a single customer at the same time.

There are several other main pain points with B2B payments in construction that harm both buyers and suppliers.

Masoudnia pointed out the use of commercial credit cards, which can be particularly painful for both sides of a transaction. For buyers, contractors often have to give card details over the phone “four or five times a day,” he said. In the meantime, suppliers have to manage tens or even hundreds of customer credit card details. Often times, because they cannot securely store this information, they have to manually enter the card details every time a customer wants to make a payment.

And since the contracting community is made up almost entirely of small and medium-sized enterprises (SMBs), a lack of access to capital between these companies also creates cash flow bottlenecks that negatively impact both buyers and material suppliers, according to Masoudnia. Financial institutions (FIs) often find these SMEs uncreditworthy and unable to understand the company’s financial health when factors such as seasonality or the actual nature of the business borrower are taken into account.

The value of the mobile device

The installation space is no stranger to FinTech. New solutions are stepping in to solve a wide variety of these cash flow and payment problems. According to Masoudnia, the problem with these tools is that they rely on taking over and maintaining a platform in the back office.

“Much of this industry is made up of companies with fewer than 20 employees,” he said. “That means the back office is very limited. You have no one in the back office to manage software. The only tool they have on hand is their phone. “

FinTech solutions not only have to take into account the special nuances of B2B payments in the installation space, but also have to be mobile-friendly in order to be able to reach end users more easily. For LinqPal, this means that providers can upload and send invoices via SMS, so that recipients can click on a link and pay an invoice with saved card and bank account details from their smartphone.

The company has also built in a mobile-friendly finance solution that allows SMBs to connect with working capital to pay for supplies. The problems of monthly payment deadlines and the resulting shortage of capital are resolved. The financing offer takes into account the differences between business borrowers, who may be plumbers or electricians, for example, each with different working capital requirements.

By combining mobile-friendly payment and working capital solutions, FinTech can hit businesses where they are and resolve cash flow bottlenecks that are painful for both contractors and their material suppliers.

With so many players in the field made up of on-the-go SMBs, solutions need to be agile, easy to use, and able to handle the unique capital pressures that can affect both contractors and vendors.



Over: The Healthcare Payment Experience Report, a collaboration between PYMNTS and Rectangle Health, is based on a census-balanced survey of more than 2,000 healthcare consumers and the challenges they face. The report reveals key insights into how providing flexible payment options and digital-first experiences can help medical providers discourage their patients from looking for health services elsewhere.