Author: Alexander Kohl

We care about value. A lot. And we believe that value is created in the relationships between businesses and their clients. It is the product or service that is deliver that creates value for the client. The payments are the value to the supplier because they can be turned into other valuable good or services.

The actual payments are not creating value. It is just a bookkeeping process. If I pay you, my bank has to reduce my balance while your bank has to increase the balance of your account. It is just a little bit of data being exchanged.

If we use the convenience of credit cards for this bookkeeping process, up to 3% is charged for it. 3% might not seem a lot. But if you assume a net profit of 15%, then this charge eats up 20% of any possible profit. It is huge!

$100 bill
$15 net profit before the credit card fee
$3 credit card fee
$12 net profit after the credit card fee

20% reduction in profit

While credit card payments are great for smaller amounts (they are fast and work instantly), they are just too expensive for large amounts.

It was therefore clear that we had to integrate the ability to pay from your bank account. True to our first concept: “Whatever data exists digitally should not have to be re-entered anywhere else.”, we wanted to keep the single click (and full automation) for payments from bank accounts.

Payments from Bank Accounts

The Australian payment system is quite fast and sophisticated. Technically it has the ability to make payments on anyone’s behalf (using direct debit). But due to security and risk management, the process is quite cumbersome and involves a three day wait until the funds are cleared.

There is so much movement in the banking industry (world-wide and also Australia) towards open banking. It is just a matter of time before direct payments will be possible from authorised applications. In fact, NAB has already published the capability and Promis is integrated with it. We are just waiting for them to complete the authorisation process that allows account holders to authorise Promis to send payment information.

We have of course looked at blockchain solutions and other alternative payments methods (including the NPP). But none of quite ready for our usecase. So for now, we have implemented a direct debit process, where you authorise us to debit the amount for a bill payment from your bank account and we then pay the supplier.

Aggregating Payments

It is not the fastest, but one of the cheapest ways to handle this. And we further reduce the costs by aggregating where we can. So if you pay 10 suppliers on the same day, only a single payment comes out of your bank account (meaning your actual bank fees will be lower).

On the supplier side, we only aggregate by client. So if one client pays multiple invoices on a single day, you receive one aggregated payment. It is pretty much the same as clients paying on statement. Expect, we fully automate the process for the client.

In addition, the payer doesn’t have to log into the bank portal to enter any of the necessary details (BSB and account number of the supplier, amount, reference). It means that these details can never be wrong as no human touches them.

It is still one of the major points of focus for our research & development team. And we will get more sophisticated. But for now, we are pretty happy with the solution.

Getting Paid

“More convenience means faster payments.”

Several studies has found that online invoices have resulted in faster payments. However, online invoices only go half the way. They still require the payer to enter details (be it credit card or bank account details). They do simplify reconciliation for the supplier, but do very little for the payer.

Promis closes that gap for the payers. All the convenience ultimately leads to faster payments for suppliers. The automated reminders with actionable steps. Well actually a single actionable step: “Pay Now” or “Pay When Due”.

And ultimately, the automation rules for payments make it even more likely to get paid on time.

“Minimise changes to existing processes.”

Change is always an investment and usually painful. We have been conscious of that and tried hard to minimise any negative impact. This is especially true for suppliers who might get invited to use Promis to deliver invoices but otherwise don’t want to interact with it.

Our aim was that suppliers would have a really quick and easy onboarding process and after that not have to think about Promis at all any more.

For anyone using Xero, MYOB, QBO or Reckon, we have certainly achieved that. After the initial setup, you can just continue creating invoices in the same way as you have before. Promis will automatically pick up the relevant invoices that are sent to Promis users and ignore all others.

Automating Reconciliation

Naturally, we also looked at the reconciliation process. In many cases, it is still a manual process. It relies on the payers to enter the correct payment references when making the payment. When credit card fees are taken out or multiple payments aggregated, the bank feeds don’t automatically match the invoices.

Promis not only facilitates the payments, it automates the reconciliation process. Every single payment is booked into the accounting system (on the payer and payee side). It means, your books are up to date in real time and you have an accurate view of who owes you and who has paid. Promis itself gives you a detailed history of which payments you received.

Updating Contact Details

A small but useful other automation focuses on contact details. If you are like most small businesses, you only enter minimal client contact details into your accounting system. Supplier contact details are probably non-existent.

Promis updates all your connected client and supplier details. This includes addresses, phone, ABN and bank details. So your accounting system is always up to date.

This also means if you change your address, all your suppliers’ and clients’ accounting systems will be updated with the latest details. New bank account? All updated and any future payments flow into that as Promis manages it. New phone number? You change it in Promis and it flows through to all your active contacts.

What Is Still Missing?

We’d love to hear from you. What else is part of your invoicing or payment process? What is still painful? Do we need to consider anything else? We are building Promis to make your life easier. To free your time for what really matters.

“Whatever data exists electronically should not be re-entered”

This is one of the guiding Promis concepts. All features have been created from that. And wherever we could reduce a user interaction we would. So most of our automation happens silently in the background without the user having to think about it. As you use Promis, it learns from you and keeps doing what you would do.

Bill Sources

Connected suppliers are the most efficient way to consume bills. If they use one of the supported accounting packages, this is a 10 min setup process, which does not affect their processes after that, but just silently works away. We are in the process of connecting to larger ERP systems (Microsoft Dynamics Great Plains already works).

As we built Promis, the e-invoicing interoperability framework was being created. Promis is one of the first accredited providers. That means that any invoice that is sent through the framework will arrive with Promis users and any invoices sent through Promis are received by any user of the framework (once it is fully operational, currently waiting for the ATO).

The benefit of both approaches is that all bill details come across 100% accurately. No human review needed.

The downside is that both parties (the sender and receiver of the bill) need to be connected. That takes time.

So we have integrated an OCR progress that extracts the data from invoices. You can either upload it straight to our site or forward an email with the attachment. You can also just give your specific email address to your supplier and get them to email it directly.

But it means you have to check the data. While the process we are using is quite sophisticated and actually uses machine learning to learn from your reviews, it can never give the same accuracy as the actual digital bill data from a connected supplier.

Inviting Suppliers & Clients

Naturally, we have included a quick and automated way to invite your relevant contacts. They are filled from your accounting system (so we use existing data). You can customise the email and choose who to send it to, straight out of Promis. No need for any other data entry.

We recommend getting started slowly and inviting your most relevant suppliers first. Remember for them, it might seem like a nuisance at first, until they learn more about then benefits that Promis bring.

Dashboard

“Condense to the minimum relevant view”

Most bills are loaded with information no one ever looks at. Ads, Terms & Conditions, payment options. We are already overloaded with data.

True to the second Promis concept, the dashboard condenses all of that to a simple view of how much has to be paid to who and when. A single click “Pay When Due” handles all the necessary action from there.

Promis sorts all bills by due date, so you always have the most relevant things at the top.

Sometimes, you might need more info. What we found is that the most useful data is a comparison to earlier bills from the same supplier. That way you can see whether the current bill is in the expected range.

And naturally, you can access the full bill as a pdf to look up any other details.

Our research also showed that 90% of bills are coded to a single expense account. So for most people, they can do that straight from the Promis dashboard.

The other important question is: Do I have enough money in the bank to pay this bill right now. That is why your current bank balance (updated every 30 min) shows right in your Promis dashboard. And if you use multiple bank accounts, you can just switch between them.

Automation – Underlying the Promis Concepts

“Whatever can be automated, will be.”

For us, this was not a future vision, but a challenge to be solved right now. We looked at the processing of how bills are handled and picked it apart. There is really just one important human input necessary: “Do I want to pay it?” And the underlying question is whether I trust my supplier to get the bill right.

Removing all the data entry was the first step in automating. Extracting the user expertise around how to code a bill was the next step. So when you get the first bill from a supplier through Promis, the system does not know the correct expense account to use. But once you choose it, Promis always gets it right. No need to think about it any more.

Most people look at a bill multiple times.

• When they get it
• To remember that they need to pay it
• When they pay it and
• When they enter it in the accounting system.

 

With Promis, you can look once and take the necessary action (Pay When Due). Everything else is automated. We even do a real-time lookup on the official government website to make sure your supplier is registered for GST and charges the correct amount.

And we pushed it further.

Fully Automated Bill Payments

Trusting a supplier to get the invoicing right was the basis of paying an bill in most cases. So when you set a supplier invoice to be paid when due, a quick question pops up to ask whether you want to automate that action for future invoices from this supplier.

By default, the automation rule applies only for the amount of the current bill. That means any subscriptions that invoice the same amount each month will be fully automated and not take up any of your time.

If however, the supplier changes the amount, you’ll see that straight away, as the bill will show up in your Promis dashboard. Accepting future automation for this bill expands the range of acceptable values (lets say the first bill was $100, the second is for $120, that means that from now on, all bills valued between $100 and $120 will be processed and paid automatically).

So even the setting up of the automation is automated. Promis learns from your actions without you having to think through a lot of settings. It is possible of course to edit the rules manually. You always have full control over what happens.

We like to think of the third Promis concept as:

“Whatever can be automated, is.”

We are not satisfied with any less.

And for the suppliers where you want to review each bill before paying it, you will get a notification 3 days before a bill is due. It means you don’t have to think about the bill until it is relevant and you can take action straight away.

In the next post, we’ll share about payments, another essential part of the Promis concepts.

For the past few days, I have had this sentence in my head: “Making time for what really matters.” There are so many aspects to it. There is the obvious question: how do I make time? But the deeper and more important one is: ‘What really matters?”

“Be in the here and now” is the answer for some people. “Work hard so you can retire early” is the other approach. And then there is what really drives me: “Creating a more sustainable world”.

Deciding on What Matters

About 4 years ago, my wife and I had a date night. It was one of the first times alone without the children. We had dinner, walked along the beach, then went to an Oka concert. Our sharing meandered back to one of the big decision in our lives: migration from Germany to Australia. It had been so easy to just leave everything behind and dive into that adventure. We also realised how much harder it felt now: two children, a business, a house in Noosa, Australia (one of the most beautiful places I know).

And so we decided that night that it would be good to test whether we could still be flexible. Could we still get up and explore other places in this world? We also wanted our children to really experience this trip and so decided 2016 (that was 3 years in the future from that night) would be the right year to leave.

Staying Flexible With Implementation

In the next couple of years we talked about it sometimes, but never spent any time planning or organising it. I started working on Promis full time at the end of 2015 and was totally consumed by how it could make the world more sustainable. And I did not want to let that go for this vague plan we had made 3 years earlier.

But something else kept going around my head. When our older daughter had turned 6, I realised with a big shock that a third of her time with us was over. Now she was 10, so she’d go onto her own path in less time than she had spent with us.

Realising that clinched it. So on 11 September 2016, we sat down as a family and started brainstorming ideas about what we wanted to experience and, decided to leave at the end of the school year in December.

My plan was to go offline for the first two months and just focus on the trip,, then settle in Sydney and work 3 weeks, then have 10 days with my family in nature. After that, all was open.

Making Time to Make it Happen

We made it happen. My amazing team kept the business running while I was camping with my family in the National Parks along the Australian East Coast, snowboarded in Japan and went to a Yoga Festival in Bali (actually, that was my first 10 days with my family after focusing on Promis in Sydney).

I met the complete Promis team in Melbourne for the NAB hackathon at the end of February and then moved into Stone & Chalk, the Fintech hub in Sydney.

Balancing Our Choices

What I learnt from all of that? It is possible to balance family and work, even while running a startup.

We have an almost unlimited amount of choices and it is possible to make time for what really matters. All that is needed is to decide what really matters. When it is multiple things that matter at the same time (like spending quality time with family and building a business), then there are ways to make it happen. The key for me is doing everything with 100% focus while I do it. And then moving to the next thing and giving that all my attention.

What Does This Mean for You?

What really matters to you? And how are you making time for that? Are you doing it in a focused way or juggling different things at the same time? Are you present in whatever you do?

And what does all of this have to do with Promis? Well, Cameron and I talked about what really matters to us a few days ago. We remembered that while we are building a bill automation platform, the underlying reason is that we want to free up time for our users so they can focus on what really matters to them.

Every business transaction is a set of promises. The supplier promises to deliver a great service or product. And you as the client promise to pay by the due date. You both trust each other.

Let’s take an example:

Bookkeepers are amazing people.

Imagine the care they take with everything they touch. When an invoice comes in, they check the GST is correct on it and the sums are true. They check that the supplier is registered for GST and has all the 7 required details on the invoice that the ATO demands.

Then they enter the supplier’s contact details, ABN and bank details into the accounting system. Next they enter the invoice, line by line, taking care to get every Cent correct. They also remember what the correct expense account is to book the expense into. And if tracking categories are needed, they enter those with care as well.

After double-checking, they might even scan the invoice and upload the scan to the transaction. And then they wait for the due date to come around. They find the online portal that allows for payment of this invoice, enter the reference number and credit card details and; after making the payment, enter it in the accounting system to mark the invoice as paid.

When the bank feed comes through, they reconcile the payment and can finally prepare the report for management.

Bookkeepers are amazing people.

They have the patience and attention to detail to get this right.

Day after day.

Except sometimes when a finger slips and a wrong amount or wrong bank account number or wrong credit card number is entered. That is only human. And of course, they find the error and fix it and rightly feel a sense of satisfaction for having balanced the books again.

Now imagine how this same care is taken by Promis.

Just like the trusted bookkeeper, the software checks out that the invoice includes all relevant details (by making sure the supplier has confirmed their details), that the supplier is registered for GST (by automatically looking up the ABR register), what the correct GST treatment for the client is. Then it creates every line with the relevant expense account (for your specific setup). It shows your previous invoices from this supplier so you easily see whether this one is correct. It warns you when specific line items seem really out of the norm.

After you authorise the invoice with a single click, the invoice with all details is written into your accounting system with the pdf attached.

And all of that takes a few seconds only.

And when the payment is due, Promis takes care of the money transfer, so you can focus on what is really important: creating value for your clients.

Where does that leave the bookkeepers?

Well, they are really amazing people and they care about generating value for you, their clients. They are also very smart and have seen that automation is taking over a large part of their work. So now they are focusing on creating much higher value for their clients by finding efficiencies and helping you systemise to achieve them.

They still manage payroll and BAS. But they also finally have the time to help you interpret the figures so that you can make the right decisions. And most importantly, they assist in bringing more automation into your business, so that you and your team can focus on what it really is all about: creating value for your clients.

How can Promis deliver all this?

We live in a connected world. And today it is secure, fast and cheap to connect the needs of different people. Banks and accounting systems connect to deliver loans more quickly. Peer to peer lending platforms do it to connect people who have money with others who need money. Uber connects people with cars to others who need to get to places. Airbnb connects people with room to others who want to sleep.

And in the same way, Promis connects the digital data that suppliers have created with the digital data that clients need to process the transactions.

How does it work in detail?

During signup, you authorise Promis to watch for new sales invoices that you create in your accounting system. When a new invoice is sent out, Promis automatically makes it available to your client in their Promis App. And as it is really easy for them to pay you, chances are that you will be paid more quickly than before.

Promis also automatically reminds them that a due date is coming up or when an invoice is in fact overdue. How do we identify a client? Every user verifies one or multiple email addresses. Once verified, any invoice that reaches the Promis Network addressed to that email address is automatically delivered to them.

So apart from the initial setup, no changes are necessary in your system. Promis actively works with your suppliers to get them onboarded (we are already talking to a range of government departments and large corporates to let their invoices flow into the Promis network). The more businesses request for a specific supplier to come on board, the quicker they will make a move.

Leave a comment about who your most important suppliers are where paying their invoices is a nuisance. We’ll get onto them and will let you know as soon as they have connected to Promis.

It is refreshing to hear the government speak so positively and enthusiastically about changes to Australia’s regulatory framework. And the speed at which things are moving is amazing. FinTech as a major focus in the innovation agenda makes a lot of sense and it is really encouraging to see the government’s honest focus on making it work.

What I am wondering, though, is whether the vision shared in the report by Treasurer Scott Morrison is actually achievable. It seems completely opposite to what our regulators have been created for. In essence, regulators are put in place to manage risk:  risk to consumers, businesses and Australia as a country. In addition, Australian culture as a whole has developed a strong personal aversion  to risk taking. How can that be turned around?

Regulatory Sandbox Not Going Far Enough

I have spent the last few weeks extensively trawling through regulations and the Corporations Act to try to understand how to comply in the FinTech space. Well, first of all, to even find out what we might have to comply with.

So naturally a regulatory sandbox sounds amazing, and would in fact allow us to focus on building a great service instead of being slowed down by needing to search through all regulatory requirements. It will be really interesting to see the actual details of the regulatory sandbox when they come out. But reading between the lines, they only seem to pertain to ASIC’s regulatory framework.

That leaves APRA, APCA, Austrac, the RBA and possibly the Attorney General’s Department untouched.

Clarity Across Government is Needed

It seems to me that FinTech’s biggest need is not so much a reduced regulatory framework, but for FinTech businesses to be able to get clarity on what is actually relevant to them. And not from a single department, but across all of government as a whole.

But the standard response I have been getting over the last few weeks has been: “We cannot give any legal advice. You have to get your own independant legal advice.” Doing that costs thousands of dollars, and as lawyers are all about minimising their own risk as well, the process seems to lead to the worst case advice where a maximum level of regulatory burden is advised, rather than a focus on creatively applying concepts to allow innovation.

Government, FinTech and Consumers Lose Out

By taking this approach the government misses out on a productive exchange about regulatory interpretation. One example from our experience as a fairly typical Fintech startup: if a  startup is facilitating payments from one Australian bank account to another, then common sense would suggest we would require no additional AML/CTF identification or reporting, as both parties have already been identified and are reported on by the banks that hold their bank accounts.

While this seems to be common sense, I was not able to find anyone within Austrac to approve this, leaving us with only the option of much higher onboarding costs for new clients. Costs that are completely wasted, but that the consumer has to wear.

Another example is ASIC, where I had to read hundreds and hundreds of pages to ascertain whether Promis would fall under ASIC’s regulations. And somewhere in there was one small paragraph pertaining to software that handles data transfer as not needing to be licensed by ASIC. Can I rely on that one paragraph? Does it apply to us the way I think it might? “We don’t have more details. You need to do your own research.” was the official ASIC answer.

Having someone from ASIC to sit down and discuss our situation with, and walking away with a clear answer, would be great. But even the innovation hub warns that it cannot give legal advice. So what use is it if the people who know that piece of legislation the best cannot be relied upon to interpret it for a specific circumstance? (Until they want to fine a FinTech startup for non compliance, of course).

They Are Just Doing Their Job

And yet, I understand that in the regulator’s pursuit of reduced risk, this is the only correct approach. It is the only way to eliminate risk. But eliminating risk costs money. So the big question is how this visionary report on ‘Backing Australian FinTech’ translates into actionable steps that really help our fledgling FinTech scene to grow and prosper. And, more importantly, how it can enable more efficient service delivery to consumers.

Introduce A Regulatory Mediator

In my view, what the industry really needs is someone we might call a “Regulatory Mediator“. This service would translate what regulators demand of a FinTech startup into how that startup proposes to deal with the underlying issue, and how it might tweak their offering so that there is no regulatory issue. Vice versa, this mediator would be someone who can translate specific instances – that are so easy to understand from a common sense point of view – into an agreement with the regulator that allows a specific regulatory interpretation.

This is especially true when balancing the positive economic impact to the consumer with the potentially heightened risk. If this is what the regulatory sandbox can deliver for the Australian FinTech space, we are onto a clear winner. If it becomes just another option in the huge range of regulatory scenarios that might apply to a FinTech business, then the vision of the current government is wasted.

Let’s hope that Treasurer Scott Morrison’s vision on Backing Australian FinTech has the power to reform the FinTech landscape and help Australia become a world leader in this field.

Promis was born from my frustration with data entry. While absolutely loving the efficiencies that online accounting was delivering, I still had to deal with supplier invoices in an awkward and time-consuming way. Some coming via email, other where I had to log into a portal (ASIC) to download it, others yet via paper. I had automated what I could and set most of them to auto pay.

And yet, I was left with the difficulty of getting the invoices into my accounting system to take advantage of the tax ready document storage. To use the semi automated bank file upload I still had to enter the supplier bank details and manually upload the file to the bank portal.

The Last Gap in Automation
At the same time, the whole accounting ecosystem was talking about automation and removing the need for manual data entry. So we just had to build the tool. Our first goal was to build a tool that would pick up the data electronically at the source. This means 100% reliable data without the need for OCR or human intervention. Over the first few months, we built a proof of concept that we could actually create an efficient way to connect to all the major accounting systems and interpret their data.
The next step was figuring out how to route the supplier bills to the correct clients. As soon as we had that clarified, we started on building out the systems to deal with larger volumes.

Building the Team
That is the point we started working on the next challenge: how do we get this tool out to small business owners (as they are the ones benefiting the most from it). I had watched Brian Keayes for a while and the awesome community activation projects he ran. He helped transform a dilapidated street into a vibrant cultural hub. He did amazing design work for optimal user experience and he had worked on a software project in the accounting space.

I knew I had to be patient in pursuing him. He was still busy with other projects, so I kept dropping small hints about what I was working on. And finally in November 2015 when I asked him to join us on the Promis research trip to Silicon Valley, he really got the full picture of where we are heading with that. He has been working on getting the word out and following that up with a simple and intuitive user interface.
To make Promis really useful for our users, we know that we need to get corporations on board and let their invoices flow into the Promis network.

Cameron Lawrence had been working as sales manager with me in a previous business and we had always looked forward to joining forces again. Finally the time had come. So he is making connections with larger businesses and helps them through the process of onboarding with Promis.
The team is completed by Neil Rogers, who has been working with me in four previous businesses. He is a genius in translating my ideas into fast, efficient and effective software. He has recently been joined by Fabio Gagno (Development) and Alina Petukhova (Quality Assurance).

We are currently in discussion with some other exciting people to complement our team.

When will it be possible to use Promis?
I have been using Promis to pay some of my suppliers since January and cannot wait to share the full experience with you. We are almost ready for a closed beta launch on the Sunshine Coast as our first trial region, quickly to be followed by the rest of Australia.
Maybe I should share how the name Promis came about, but will leave that for next time.