Earning money by detecting incorrect payments

An erroneous bank transfer or invoice error is easily made. Especially with millions of payment transactions being processed every day. Willem-Jeroen Stevens (44) and his company, Transparent, trace those errors.

The company operates in the background without disrupting their clients' daily operations. Away from the giants it works for, such as the German company Henkel, DHL, British American Tobacco and approximately half of all the companies listed on the AEX stock exchange. Over the past fifteen years, financial analyst Transparent has gained a dominant position among AEX-listed companies. A recent takeover in America is expected to pave the way to the United States.

’99.9% of all payments made by companies are in order’, says Stevens. For most medium-sized companies, their own financial department and standard security systems are sufficiently adequate. Things start to change where transactions run into billions of Euros. ‘We detect the 0.01% that is harder to find.’

Not a single client where nothing was found

He quotes the example of payments made in the wrong currency or a credit note that is paid rather than collected. ‘Large companies make numerous payments to suppliers. The sheer volume alone creates uncertainty.’ According to Stevens, he has never had a client where he did not find anything.

Major mistakes are rare

Major mistakes are rare. ‘We mostly detect amounts between €8,000 and €20,000.’ The company is paid a success fee for every error it finds. He won’t give precise amounts – they depend on the client and the volume of transactions. ‘If we trace €10,000, think in terms of a couple of thousand Euros.’

The company’s area of expertise, so-called ‘recovery auditing’, is a well-known concept in the United States. Nevertheless, not many companies provide this service, certainly not in the Netherlands. ‘It is quite a ‘blue ocean’ (a low competition market, editor).’

Retrieving security data

This is hardly surprising. Developing software that detects the errors missed by the standard ERP security systems, is not easy. And once possible gaps have been identified, there is still major manual labour involved. ‘We use a technique that looks for things that appear similar, but are not.’

Worldwide, Stevens has identified approximately 30,000 potential clients. He himself serves over a hundred multinationals. ‘This type of audit is not for everyone.’

The analysis process starts with retrieving the company’s payment data. ‘We feed those through our ‘engine’, the secret sauce.’ The deviations Transparent’s system detects, are checked and discussed with the client’s controllers. ‘And we end up with a list we are going to work on.’ Transparent subsequently presents the supplier, bank or tax authority with the payment in question and is paid once both parties agree to the administrative error and correct it.

Due to their complexity, these audits are scarce. ‘Every one-and-a-half to two years, or even three, otherwise it doesn’t pay off.’

Profitable for a few years

When Transparent was founded, fifteen years ago, Stevens had to work hard to convince his first client of the strength of his system. That first client was the towage company Wijsmuller, owned by Victor Muller (later Spyker, editor). Once Heineken International joined in, the company took off and today shows an annual growth averaging 30 to 50%.

After years of investing, 2015 will be the year to reap the benefits, Stevens expects

After years of investing, 2015 will be the year to reap the benefits, Stevens expects. The entrepreneur reckons he will achieve a net turnover of over €10 million. He does not want to disclose the EBITDA, but does state that his technology company with offices in Belgium, South-Africa, England and the United States, has been profitable for only a few years. ‘Everything has been invested in expansion, people and product.’

A few years ago, in order to ease its growing pains, Stevens called in the help of RiverRock European Capital Partners, a company that offers ‘mezzanine financing’ – a hybrid of debt and equity financing. ‘They specialise in funding fast-growing companies that have trouble getting a loan elsewhere.’ Thanks to the capital injection by RiverRock, Stevens was able to initiate a small takeover in the USA. ‘That gave us a ‘jump start’ in the US market.’

‘By the end of 2015, we will take a good look at our current position. That will also be the time we will seriously look into the possibilities of venture capital.

Financieele Dagblad
Author: Rutger Betlem
Date: 19th January, 2015