The rise of digitisation in recent years has helped businesses transform the way they work. Whether a company has used automation to make account reconciliation and reporting easier or found ways to optimise other processes, using technology that integrates across a business is what drives truly powerful transformation.
A further area every business should be looking to improve is payment processes and technology, particularly those working in the wholesale and distribution space. Doing so will help drive stronger cash flow, faster payment times, and access to powerful real-time data. This article outlines how improving your payment technology and processes can transform your business and its finances.
Make disconnected systems and processes a thing of the past
In business-to-business (B2B) trade, payments are often disconnected from other processes, such as sales purchase orders, account reconciliation, order fulfilment, and warehouse management. Running these processes without integration can lead to slower payments and order fulfilment and make it more difficult for customers to pay on time. In fact, 47 per cent of the total value of B2B trade credit sales in Australia continues to be paid late or not at all.
Here’s an example to consider:
Let’s say your business has an order system where customers send their requirements to a generic sales inbox:
- Once the order is received, the relevant person checks that the stock is available and, if available, they reply to the customer with an order confirmation.
- When the order confirmation is sent, the accounts receivable team sends an invoice to the customer. This may happen days after the order is submitted when the customer is now focused on other priorities.
- The invoice then sits in the customer’s inbox unopened for a week or two before it’s sent to accounts payable for processing.
- Your accounts receivable team will likely send a few email reminders to prompt payment, but by this point the customer has already received the order and is less motivated to make quick payment.
- By the time payment is finally processed, you might receive payment a couple of weeks after the invoice’s due date, contributing to poor cash flow and perpetuating the cycle of inefficiencies caused by disjointed business processes.
Implementing an integrated payments system eliminates the friction in the example above, allowing your company’s accounts receivable team and the customer’s accounts payable team to share data and complete the transaction seamlessly. Further, the data can then be integrated with your business’s accounting and ERP systems to make the subsequent processes more accurate and efficient.
Better financial management should be driven by payment efficiencies
With integrated payment technology, distributors and suppliers can make payment processes simple and efficient. For example, sending invoices and statements using pay by link functionality allows businesses to send their customers all the information they need to review their orders and make payments in one frictionless step. It’s easy for accounts receivable teams to manage and track, and convenient for customers to click the link and make payment, especially when a range of embedded payment options are available, such as bank transfer, credit payments and on-demand finance.
Use integrated payments to bridge cash flow gaps
Accurate real-time data, identifying where each payment is from, and strong debtor management are crucial to business sustainability, especially as inflows and outflows vary according to customer demand. Combining integrated payment systems with your accounting software is key to improving data and payment efficiency across your business. Once a payment is made or received, the data is automatically pushed to the company’s accounting system, allowing for ease and efficiency in bank reconciliation and other accounts receivable and accounts payable processes.
The ability to send a customer all their outstanding invoices in one link, along with a variety of convenient payment methods makes debtor management more streamlined and efficient. For example, when they choose to pay by credit card, the customer can effectively extend their payment terms if their credit card provider gives the company an interest-free period on its purchases. Similarly, with access to point-of-sale finance, customers will have more time to pay while the supplier receives full payment upfront. Not only does this boost the supplier’s cash flow, but it also helps strengthen the customer’s cash flow, as they can spread out payments over time, easing cash flow pressure across the supply chain.
Many businesses are still turning to bank loans to bridge cash flow gaps. While a bank loan may provide a capital injection, it also comes at a high cost, with interest rates continuing to rise and the protracted process typically required to secure finance through traditional channels. Distributors and suppliers can address the root cause of cash flow gaps by implementing seamless payment processes and offering multiple, and more convenient payment options.
Get paid faster and strengthen your cash flow
Continuing with disjointed and outdated payment processes can tighten your cash flow and make it more challenging to meet ongoing expenses and grow. Using technology to improve payment processes and data flow across your business helps address late payments at their root by eliminating the friction that typically makes it difficult for customers to pay on time. With the right integrated payment technology in place, your business should be able to:
- Send invoices and statements in one simple step.
- Easily push data from your payments system to your accounting system.
- Use real-time data to better manage your cash flow and grow faster.
Spenda serves as both a technology solutions provider and a payment processor, delivering the essential infrastructure to streamline business processes before, during, and after payment events. Its comprehensive solution empowers businesses to effortlessly manage invoices, facilitate payments, and even access on-demand funding – all within the Spenda ecosystem.
Spenda’s Business survival guide: Strategies to accelerate growth by improving cash flow outlines everything that businesses need to optimise cash flow and strengthen their financial resilience. Click here to download your free copy.
