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Automating the accounts receivable process can help iron out cash flow challenges.
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How tech can beat the late-payment cheats
01 December 2023
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13 minute read
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Has getting your invoices paid on time, or at all, become harder than it used to be, of late? For a growing number of businesses of all stripes and sizes, the answer is yes.
That’s hardly surprising, given millions of Australians have been doing it tough in the wake of the COVID-19 crisis, with many finding it difficult, if not impossible, to make ends meet.
All five Living Cost Indexes rose by between 5.3 per cent and 9 per cent over the 12 months to September 2023, according to the ABS. The LCIs measure the price change of goods and services and its effect on the expenses of a range of household types. Cost of living has become the greatest driver of stress for Australians by a big margin, according to NAB research.
“It’s difficult to find an area of spending that hasn’t gone up. Groceries, petrol, mortgages, rent, electricity, gas, dining out, travel, transport – you name it, everything we buy as consumers is up in price,” the bank’s CEO Ross McEwan noted in a speech in August 2023.
Businesses, too, are struggling to manage rising costs, maintain their margins and pay their bills.
Cash flow crunches
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When times are tough, slowing down payments to creditors is a common tactic, for individuals and enterprises looking to buy themselves some extra time. And when it occurs frequently and regularly, the effects can be deleterious in the extreme, to the creditors in question.
Sixty per cent of small businesses reported cash flow issues in the past year, according to the Xero 2023 Money Matters report. More than a third of businesses cited bills not being paid on time as the top financial challenge they faced.
Late payments can put a squeeze on cash flow, making it tough for businesses to pay their own staff and bills on time. In a worst-case scenario, a significant cash flow crunch can derail an otherwise profitable enterprise.
Healthy growth can also be difficult to achieve, in the absence of the cash that’s generally needed to pursue business development opportunities.
Managing accounts receivable manually
Payment slowdowns can be exacerbated by invoicing, payment processing and financial record-keeping discrepancies, and inefficient collection practices.
Investigating and rectifying an invoicing error, for example, might extend the payment cycle by several days, or even weeks. Multiply that by dozens, perhaps hundreds, of customers and you’re looking at a significant volume of funds tied up in the system rather than being deposited where they belong, in your bank account.
Inefficient and ad hoc dunning practices, meanwhile, can make it difficult for accounts receivables teams to keep on top of collections, particularly if the volume of invoices is high.
Exploring automation
Automating the accounts receivable process can put paid to these and other revenue management challenges, by simplifying and optimising every aspect of the workflow.
It enables businesses to minimise manual work, speed cash flow, gain real-time business insights, and improve the customer experience by empowering consumers and businesses to serve themselves.
Human errors, compliance violations, security risks and customer dissatisfaction – all of which are costly to businesses – can be virtually eliminated.
Organisations that have made the switch have reduced the time to close from 15 days to two days, slashed invoicing and billing labour costs by over 50 per cent and cut the invoicing process from six days down to 24 hours.
Adopt the latest generation technology that takes you from product inception through to revenue recognition, invoicing and collection and those very significant benefits can be quickly realised by your organisation, too.
We’re talking cloud-based revenue management software – a must-have app in your ICT stack.
Smartly implemented, it will swiftly prove to be critical digital infrastructure; enabling technology that offers automated quote-to-cash support for whatever pricing model you choose to pursue.
Select a revenue management platform that integrates seamlessly with your ERP and CRM and you’ll enjoy the benefits of data integration, along with fast and accurate quoting, billing and collections.
Build a stronger future
The upcoming year is likely to be a challenging one for businesses, as consumers and commercial customers alike batten down the hatches. Optimising cash flow will be essential, for those that hope to maintain margins and grow sustainably. If these are priorities for your organisation in 2024, automating your accounts receivable function is likely to prove a very smart move.
Carl Warwick is regional sales director, Asia-Pacific and Japan, BillingPlatform.
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