ZenCash Boosts Small Business Cash Flow

Peter Cohan, (Forbes):  If you’re a small business, a clog in your cash flow pipeline is fatal. Thanks to Dallas-based ZenCash, those clogs are likely to be cleared out much faster — a vital benefit.   In an October 26 interview with Brandon Cotter, ZenCash CEO, I learned that the company was founded because of the pain that Cotter suffered early in his career in trying to get paid by his customers. He found that his lack of customer cash put him in a tough spot when employees, suppliers, or landlords asked for their money.

Cotter’s start-ups include online retailer, musicforce.com; Internet service provider, createtech, that was sold to Broadcast.com in 1997; wireless software maker, Stick Networks, and search provider, Viewzi. In 2009, Cotter founded Doublewide Partners and acquired online invoicing firm, Blinksale.com, In 2011, Cotter founded ZenCash. While not considered sexy by Silicon Valley standards, the whole receivables management business (which often includes debt collections agencies) makes up a multi-billion dollar business. In 2010, for example, they helped businesses recover $55 billion in debt. And there are about 2 million small businesses in the U.S. that could potentially benefit from the service.   It’s usually quite difficult for businesses to manage unpaid invoices – they get “mired by paperwork, Excel spreadsheets and pencil punching on both ends,” according to Cotter. 

But ZenCash strives to simplify that process. According to Cotter, “Through a combination of an elegant cloud application and offline tools that help small businesses follow up on and prevent non-payment, ZenCash is turning the traditional model on its head and helping small businesses make ends meet in the process.”   ZenCash has made considerable progess since launching in February 2012. Since then it has established eight partnerships with invoicing/accounting companies including Intuit’s (INTU)QuickBooks, Xero and Clio.   And ZenCash has done an impressive job of helping some of its clients collect old debts. For example, the service has gotten money in the door for receivables that were so old that the companies were ready to write them off –  ”from a few months old to in one case, 404 days,” exclaims Cotter.

And if companies need the collections component of ZenCash, it’s offering quite a bargain. While competitors can charge a contingency fee of 40-50%, of the amount they collect for customers, ZenCash’s fee is often half this amount—and “just a single click away for a small business owner,” according to Cotter.   ZenCash has raised about $1.2 million from friends and family, is pursuiing $3 million in venture capital and currently employs 11 people in Dallas, San Francisco, and Europe.

Cotter has big ambitions but seems to have his feet on the ground. As he said, “By 2017 it is very hard to predict what ZenCash will look like. But I would like Microsoft (MSFT) or Intuit to have acquired the company for $1.5 billion so I can be in South America building huts for a valley of needy kids.”

EXACT CPA COMMENT: 

ZenCash in theory seems to be a wonderful way to get your clients to pay their bills, but I'm not so sure if I buy into the idea for the professional services marketplace.  In going to their website, there seem to be options for action prior to the collections process:

• Send a print version of your invoice
• Send a printed thank you note
• Send a thank you note with a $15 iTunes gift card
• Place a phone call from receivables specialist

I understand that ZenCash looks to alleviate the administrative burden that comes with collecting receivables, but as a professional in the financial services industry, I'm not sure what additional value I'm receiving.

When providing personal financial services like tax and accounting, the relationship with the client is of the utmost importance, in my humble opinion.  I'm not sure how I would feel if I provided my client with a service and then used a third party to try and collect.  I'm also not sure what impression that would leave on my clients.  I would prefer that a client pay me two weeks later after a phone call from me than receiving something from a third party vendor.

Now I must admit that the legal and collection services look like a valuable resource.  If you have become sure that a client is not going to pay you for services rendered, ZenCash looks like the folks to call.  Their contingency fee is much less than other receivables management firms in the market.  In addition, if your account qualifies and you decide you want to escalate the process and take legal action, ZenCash assists you with that process.

Overall, I'm not sure that their receivables management offering would be right for folks in the professional services business, however their collections management and legal action services might prove to be invaluable for small businesses.