As one of the most important aspects of doing business these days, cash flow is something that affects companies at all enterprise levels. Tracking accurate cash flow is at the heart of any business venture; however, it is more important to manage inflows of cash in a timely manner.
Although small business owners are thought to suffer the brunt of securing payments from their clients, the fact is that large enterprises and even governments are known to be affected by untimely payments that place constraints on their cash flow. In 2016, a tech firm based in San Francisco conducted a survey among owners of small and medium-size American companies on their struggles to get paid. Nearly 80 percent of owners polled admitted that they often have to forego paying themselves because they were waiting on outside payments. Other findings indicated by the survey included the inability to launch marketing campaigns, stock inventory and even make payroll because cash flow was inadequate.
The Problem With Payment Delays
It would be easy to assume that the problems faced by the aforementioned business owners stems from clients taking their time in making payments; the reality is that most clients actually pay within the agreed terms. The issue with late payments can more often be traced to problems related to invoicing systems.
As the world moves towards instant payments, many business owners are forgetting to leverage their invoicing options. Let’s say a social media influencer with a PayPal account posts a new YouTube video that she intends to monetize. The influencer will certainly enjoy the instant payments made by Google after advertisers begin to get traffic originating from her video; this is a largely automated process that does not require invoicing. What happens when a YouTube viewer becomes interested in the influencer’s work and places an order for a custom video? More than likely, the influencer and her new client will agree to certain payment terms based on the receipt of an invoice.
If the influencer does not have a proper system in place, she may put off generating an invoice for her white label video, particularly if she is busy producing her own work for monetization. In the meantime, her client is enjoying the custom video and the fact that he has not received an invoice, which gives him even more time to pay. The client may even order a new video, which he will not have to pay for until a second invoice arrives, and this means that the influencer’s cash flow will suffer in the meantime.
Real-Time Invoicing Solutions
A sensible solution to the cash flow problem created by poor invoice management is to apply real-time electronic invoicing add-ons that can run on enterprise systems such as SAP. In 2017, revenue collection agencies in Turkey and Spain are implementing real-time invoicing systems so that they can collect taxes the moment that they are due. Similar solutions are being implemented by small and large companies for the purpose of improving their cash flow situations.
In the end, efficient invoicing is more than just a fancy version of an established business process; it is a solution that can ameliorate the issue of cash available to business owners.