Businesses know that they need profits and cash flow in order to sustain their operations. This money helps to pay bills plus offers a way to reinvest in the company.
However, U.S. Bank found that cash flow and profitability tend to be a real struggle and that 82 percent of business failure is due to poor cash flow management. In a survey of 1,000 small business owners, 43 percent of respondents named cash flow as their top business concern in 2015. The Thompson Reuters/PayNet Small Business Lending Index concluded that small business borrowing is up 7 percent year-over-year due to slow- and non-payment by their customers.
This concern is due to some key issues within how payments are perceived by businesses. For example, over half (57 percent) of international businesses surveyed in a 2014 study noted they would purposely delay payment to a supplier while three-out-of-four businesses considered paying outside of the required payment terms as normal financial practice. That behavior has essentially created a late payment culture among B2B companies, which can put additional pressure on already tight profit margins.
While this is an issue, there are ways that a B2B company can turn the corner and start to improve cash flow and increase profitability. One way is to use an online b2b invoicing tool that can be a profit game changer for these six reasons:
Speedy Accounts Receivable Process:
By using an online invoicing tool, you will be able to simplify and automate some parts of the A/R process, which then speeds the actual time it takes from billing customers to receiving money. The longer there is a customer balance, the more pressure is put on profitability so if you can accelerate the entire process, you’ll end up with less time spent on A/R, which means greater profitability.
In the continuing theme of “time is money,” an invoice tool removes days of invoice transit time by eliminating paper processes and the need to produce and mail a document that may even include a trip to the post office or nearby mailbox. Instead, an online invoicing solution instantaneously delivers an electronic invoice to the customer’s email box. This reduction in labor expense and the number of days saved, incrementally raising profitability.
Lower Billing Costs:
The lower your overall expenses, the greater your profitability. It’s that simple. Using an online b2b invoicing tool takes out billing costs that include paper, postage, envelopes and productivity time on the part of the staff that handles invoicing within the company. This is especially important because these costs do not have any way of being written off as part of a revenue-generating task. In this way, the ability to lower these costs can further increase profitability beyond those associated with bringing in revenue.
Reduced Human Errors:
The ability to automate many aspects of the b2b invoicing process through the use of an invoice tool means far fewer human errors that incrementally add to the overall cost formula. Otherwise, these human errors would mean time and money spent on resolving these errors that would eat into profitability.
The faster you get paid, the greater your cash flow, which helps you more efficiently handle how you pay for your obligations. That leaves you with more money in the bank and accounts for a much better profit. When you have to make your payroll or get your bills paid, every day counts so real-time payments take those numerous days that a paper check or other payment form would require out of the equation. Imagine what next day funding* could do for your bottom line.
Customer Acquisition and Retention:
Customers like the fact that you are a tech savvy company that uses electronic invoices so you will have a better chance of attracting new customers and retaining others. This includes the ability to attract global customers that like the fact that you can create and send invoices in their language, currency, and tax systems as well as accept international payments through that invoicing tool. The more customers you can acquire and retain through your commitment to the latest technology, the greater your profit.
Even better is the fact that many invoicing tools are free or very low cost so investing in a b2b invoicing tool won’t be a hit to your profitability even from the point of implementation. Instead, you will be able to immediately recognize the cost-saving, efficiency benefits that the online invoicing process delivers for your business and its bottom line.
*Next day funding is not guaranteed for all merchant accounts. Available only for qualifying merchants. To see if you qualify, call (800) 993-6300 now and speak to an account specialist.
About the Author:
John Rampton is an entrepreneur, investor, online marketing guru and startup enthusiast. He is founder of the online invoicing company Due. John is best known as an entrepreneur and connector. He was recently named #2 on Top 50 Online Influencers in the World by Entrepreneur Magazine and a Blogging Expert by Time. He currently advises several companies in the San Francisco Bay area.
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