Entrepreneur lends a hand to businesses

John Hayes is a tinkerer at heart, and his innovations have been squarely aimed at the small- and midsize business owner.

Hayes, 61, a South Georgia native, has made it his mission to make life easier for those businesses. The Atlanta-based serial entrepreneur helped create one of the first computer word processing systems while working on Capitol Hill, and he later helped invent a software accounting program, later known as Peachtree Accounting Software.

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Sean Drakes/Special

John Hayes sees opportunity — and has seized it — in the recession for business-to-business companies. His latest venture is FTRANS, a credit system for businesses and their suppliers.

THE JOHN HAYES FILE
• Residence: Druid Hills
• Family: Wife, Gail; children, Sarah, 31, Katie, 25
• Hobbies: Anything outdoors -- boating, hiking, camping, scuba diving.
• What are you reading now? "Benjamin Franklin" by Walter Isaacson.
• Favorite book: "Diffusion of Innovations" by Everett M. Rogers.
• Favorite movie (all-time): "Three Days of the Condor"

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Now Hayes, a Georgia Tech engineer by training, is promoting his latest product — FTRANS, a Web-based system that he says could revolutionize business-to-business transactions for small- and midsize companies that normally wait 30, 60 or even 90 days to get paid.

Hayes says there’s a better way. With his service, such sales are handled similar to credit card purchases. A financial institution takes over, paying the seller almost immediately, while also providing insurance of sorts in case the buyer falls into trouble and can’t pay its bills. Columbus-based Synovus is a major investor in FTRANS, and more than 40 Georgia banks are using the system for more than 30,000 businesses.

Q: Tell me about FTRANS and what it offers customers?

A: The basic concept of FTRANS is to give the small or midsized business who sells to other businesses or government the chance to outsource their accounts receivable system, the same way a retailer outsources their credit system to the bank credit card. Or to say it another way, we’re the bank credit card system equivalent for the business-to-business seller.

Q: Is the goal of FTRANS to help businesses save money or grow?

A: Both. Actually there are four benefits we are able to offer to the small business. One is we save them hassle and money by outsourcing the credit system. Number two, we reduce the risk that they have of their customers going bankrupt or their not being paid. Third, we lower their capital requirements, because when a business has to fund its [accounts receivable], it’s got to get that money somewhere, and because we’re causing invoices to be paid within a few days instead of 40 or 60 days, it dramatically lowers the amount of capital they need to run the business. And finally, particularly in this economy, it’s a great tool, because if you’re a business and you can give your customer more credit, you’ll sell more.

Q: What is the cost?

A: The cost is around 2 percent, 2 [percent] to 2.25 percent to the business, the seller. [It’s a] one-time, up-front cost, which is typically less than they’re spending today to run their own credit system. And about the same or less that it would cost to take a credit card for payment.

Q: Throughout your career, you have developed products that make it easier for small and midsize businesses to operate. What’s your fascination with that part of the economy?

A: Well, first of all, I think it is the core of the economy. It’s where 75 percent of the jobs get created. Fifty percent of the economy is actually in small and midsized businesses. It’s really what makes America work. I don’t really have very much experience with big companies. I’ve sold two businesses to big companies and have gone over and worked for the big companies for a year or so after the sale, but I’m more of a small-company guy. I love the market, I love the companies. It’s just where I’ve always been.

Q: You’ve written that the credit crisis roiling the economy presents a business opportunity. Can you explain?

A: Any business that can give their customers today more credit is going to sell more. Just think about a retailer, somebody who’s running a furniture store, and they need to buy inventory. And they’ve got one manufacturer over here who says, “Happy to sell you sofas but it’s cash in advance,” and the other manufacturer says, “Happy to sell you sofas and it’s 60 days.” You’re going to buy from the guy giving you the more credit.

Q: What’s your role in this?

A: We’re the interchange. We help that seller, that B-to-B seller, give more credit to their customers and therefore be in a position to sell more.

Q: Who absorbs any losses?

A: Financial institutions. It’s just like the credit card system. There are financial institutions that sponsor the buyer, and there are other financial institutions that sponsor the sellers.

Q: Can you talk a bit about how often defaults occur?

A: We’ve had one bankruptcy this year in 2008 on the buyer side — of course which was then covered by a financial institution. Out-of-the-box defaults, not counting bankruptcy, it’s probably in the 0.75 percent range, I would guess, of dollar volume.

Q: Do you expect the default rate to rise given the recession?

A: I would expect it to go up a little bit. And we’ve seen it go up. We’ve seen the default rate go up slightly. We’ve also seen it tougher to get credit coverage on certain companies. Airlines have been hard since we’ve started. Residential home builders are very hard to get credit protection on. We’re seeing more and more retailers declined or have their credit curtailed.

Q: Your recently self-published book [“Use the Credit Crisis to Grow Your B2B Business”] includes a detailed history of banking. Were you a historian in another life?

A: I’ve always been fascinated with history, and I see myself as a historian of technology and historian of the economy and politics a little bit. … Even though I was an engineering undergraduate and not a history major, I’ve always had a great interest in it, and particularly in the history of innovation. That’s really kind of my major reading topic, usually.