Updated: April 19, 2023

Solving $1 trillion dollar unpaid invoice problem

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Key Takeaways

The lightning network is great for buying a coffee or a pizza from a merchant who accepts payments. Businesses can immediately save 2.9% + 30 cents per transaction. If you are reading this, you likely know this. 

I am not here to talk to you about low fees and instant payments.

I do want to discuss something I have seen businesses experience firsthand that the Lightning Network could help solve.

The Lightning Network is a tool that can solve cash flow problems for startups and small businesses. 

In my past life before entering the Bitcoin and payments industry I was a workhorse for a small to medium size business (SMB) digital marketing agency that was doing nearly $100mil in revenue yearly. 

We worked with very early-stage SMBs as small as one employee. Due to the sheer volume of business we did, I got to see firsthand the cash flow pains that SMBs experience.

These cash flow issues would create wasted time not only for the business owners but also for their external partners chasing down accounts receivable.

According to Plum Consulting London LLC, in 2017 approximately 11% of invoices within SMB enterprises were paid late. This equates to about $1.01 trillion dollars yearly. 7.5% of these invoices are written off as bad debt. This lost time reduces productivity and focuses in other areas of the business. Hundreds of millions of dollars of productivity wasted.

NEWS FLASH: In 2022 new research shows that 50% of invoices issued by small businesses are late and 12% are paid more than a month after they are due.

We could talk about the problems that credit cards create with expiration dates, lost cards, stolen cards and more, but for this we will simply focus on the fact that invoices are simply not getting paid at the rate they should.

The wave of new business applications is not slowing down. The world population is up by about 2.9 billion people in 35 years, and new business applications are following nearly the same trend. We will need technology to automate and encourage easy payments flows.

Business is a game, so let’s gamify it.

One thing that is well-known about how people interact with technology today is that we respond to gamification and incentives. 

Great examples are reward processing in video games, and Robinhood’s now removed confetti upon actions within the app.

Gamification is now a part of every single aspect of what we do online. Starbucks has gamified the coffee buying experience, education, investing, social media, workplace learning, you name it. 

Everything is being gamified. 

This begs the question as to why economically productive business processes related to payments are not gamified. Right now we have a 1 trillion + dollar problem that not only leaves debt balances but also robs employee productivity. (Most late payments are received 5.8 days later on average)

There is a way to automate and gamify SMB payments and debts in a way that saves time and potentially trillions of dollars across our economy while increasing productivity. Lightning Network can automate payments based on cash flows and payments platforms can create the ability to incentivize this behavior.

This will not only strengthen the cash flows of businesses by reducing the 50% of unpaid invoices but reduce wasted human labor.

Lightning Network automated invoicing

Let’s go with a parallel example of how something this works currently in the legacy payments system. Stripe has a great feature built into their payments solution called “Capital”. It automates creating a loan for a business owner who is pre-qualified and automates the payback based on revenues.

Something near this is happening in Web3 with SuperFluid.

Lightning makes it possible for fractions of debts to be paid over time based on cash flows coming into the business in the same way.

As revenue comes into the business, payment for recurring services the small business owner uses can be paid in real-time with the cash flows from the business even if they have no loan. 

Fixed costs, variable costs, and other debt obligations can be automated and paid in real-time making recovering late payments to invoices easier for the businesses on the other end of this transaction. 

Gamification encourages better behaviors

Positive reinforcement is what drives better outcomes. This is why we are seeing the gamification of everything. It encourages better behavior. No one has tried to solve this for SMB entrepreneurs who are the biggest risk-takers in the world.

By enabling people to pay back in a gamified reinforcing model we can reduce wasted resources and potentially save trillions of dollars of economic value.

The potential to build rewards and incentives for top customers who pay on time is endless. Do businesses just need to ask themselves how much time they are wasting chasing down collecting late payments?

In Summary

Gamifying payments through the simplification of paying down invoices in real-time based on cash flows can help reduce unpaid invoices. Data is showing that over time this problem is increasing as the total % of payments that are due is not being paid on time. Lightning can enable for businesses to better manage their cash flows by making payments in real-time.

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