Amazon’s Pay By Invoice Problem and it’s effect on Cashflow
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Amazon’s Pay By Invoice Problem and it’s effect on Cashflow

Amazon, the largest online retailer in the world, allows over 1.9 million global businesses to use its platform. These businesses account for around 60% of their retail sales which, at the time of the last report, made a ‘Modest’ profit of $25 Billion – $39 Billion, according to the Selling Partner Services team. 

But, how quickly do they pass on that profit to their sellers?  

In the digital day and age, you would expect the transfer of funds to be almost instantaneous, but sadly, for some of the businesses that sell on amazon they could be waiting longer than a month to see the funds in their bank. This can be disastrous for businesses looking to start selling on Amazon or even existing businesses that are suffering cash flow problems after the COVID-19 pandemic. 

In this article we explore Amazon’s Pay by Invoice problem and how it is negatively impacting those small – medium businesses who account for 60% of their retail sales. 

What’s the problem?

The problem is that some sellers on Amazon are waiting upwards of six weeks to receive funds for their goods, this presents a raft of cash flow problems for most businesses. Many trade suppliers issue ainvoice to be paid at a maximum of 30 days from receiving the credit and Amazon does not allow you to opt out of Pay by Invoice, meaning that if you want to sell on the world’s largest marketplace, you better be willing to wait to be paid for the stock you sold. 

 

 

"Key Benefits' Of PBI

 

Ironically, one of the “Key Benefits” they’re proposing to potential buyers is that Pay by Invoice helps to improve cashflow by, “Freeing up cash by extending payments to 30 days from the day your items ship” with little thought of those who are at detriment from waiting a maximum of six weeks for payment.  

Should the buyer fail to pay the seller 30 days from the “Purchase date” the business that has sold their item on Amazon Market place needs to wait an added 15 days to claim the funds that they are due. 

For most established wholesale businesses, cashflow should not be a problem – but for retailers, upstarts and other businesses whose turnover was affected by the COVID pandemic and recent supply chain issues (Cost of shipping containers rising astronomically, Suez Canal blockage, the lack of HGV drivers causing a shortage of fuel across the UK) are in no position to wait in excess of six weeks for their payment. As one of many members of the amazon business forums laments: 

“…not every small business can afford the delay in cash flow. After all small businesses are sometimes running on small margins, plus they don’t have the luxury of telling their staff suppliers/ et al to wait weeks. Personally, I’d rather no sale, than have a sale that takes weeks to get paid.”

The general consensus seems to be that this should be an opt-in service as businesses who are, currently experiencing negative cashflow, whether due to recent unforeseeable events or just a particularly slow few months, are likely to continue to be out of hand for the foreseeable future despite making sales. As the commenter above mentions – if you need to pay staff this week/this month, then being guaranteed payment in 45 days should the ‘buyer’ fail to pay won’t be of much comfort to either your employees, yourself or the suppliers that have invoiced you already. 

This is an especially big concern for businesses with higher ticket electronic items. Whilst receiving a sale is great in the majority of scenarios – should a business decide to upgrade their offices with new Monitors/Tv’s/Computers/Mac’s etc. they could potentially wipe out your stock and opt to pay in 30 days, If that payment fails to materialise, you’re waiting an additional 15 days beyond that point to receive the money owed. If you fail to have the necessary capital on hand to cover the purchased stock via PBI (Paid by invoice) you might find yourself in a really sticky situation and be needing to improve your cashflow immediately in order to cover costs and restock. 

The Solution

Following the financial crisis of 2008, Capify has provided alternative finance when it was most needed to companies throughout the UK. Our focus is on the needs of our customers, which means making our loans easy to use and accessible is critical. Applying online takes only 60 seconds to complete, and at the end, you’ll find out if you’ve been conditionally approved! 

If you’re in the situation such as the Amazon seller above, where you’d rather not wait to increase your working capital and cashflow because the buyer has opted for the PBI(Pay By Invoice) option, then check your eligibility here. You’ll find out whether you’re eligible in less than 60 seconds and could be funded in a day or less, rather than a whole 45 days. 

If this sounds like something that would improve your current cashflow situation, then here’s all you need to qualify: 

  • Run a UK-based business as a limited company 
  • Process more than £10,000 a month through your business bank account
  • Have at least 12 months’ trading records 

If you need assistance managing cash flow, or you’re looking to fund growth, Capify is proud to offer a range of alternative finance options. 

You can apply for an alternative business loan from Capify in several different ways. If you’re in a hurry, take a look at our simple online application with an instant decision on your eligibility.