3 Common Cash Flow Problems: How AR/AP Digitization Helps

Nov 1, 2021

As we dive deeper into our AR/AP series, we’ve covered:  four mistakes enterprise companies should avoid, the importance of AP automation for business growth and the digitization of the CFO role. Today, we look at 3 common cash flow problems and how automating accounts receivable (AR) and account payable (AP) can elevate enterprises to the next level. 

Cash flow. Cash flow. Cash flow. Say those words to any enterprise owner and watch the person flinch. Cash flow is one of the top reasons that small businesses, startups and enterprises fail.

Regardless of how one view’s cash flow, the basics remain the same: Cash flow matters in all revenue models. Generating sales and leads is great, but does not matter if money is not collected.  Growing an enterprise and scaling it is essential, but having some available cash month-to-month is necessary to stay open.  

Here are three common cash flow problems and how automating AR/AP can help:

#1. Late Payments

Late payments are a common problem in every company, and no one is immune. Let’s not forget the lessons left by companies such as Sears. Unpaid or late invoices often stem from human error and inefficient manual processes. These late payments create a negative ripple effect throughout the organization. From hours spent chasing customers to interruptions in cash flow, these challenges affect the bottom line. Enter in automated invoice processing. This makes it faster and easier to keep up-to-date with accounts while delivering the benefits of a positive customer experience and a happier retained client.

The benefit of automation: Reduced payment processing time

Digital payments are fast. In fact, Deloitte’s PayTech Revolution report found processing digital payments is more than 50% faster than traditional payments. As quicker payment processing translates to better management of the company’s receivables, we see Customer Experience officers (CXOs) and Accounts Payable (AP) teams rejoice.

This frees up the AP team to do what they do best, focus on delivering the financial reporting. Becoming strategic partners with management and providing real-time updates means better decision-making. This can help protect the company’s financial stability and reputation with suppliers.

#2. Not Being Organized of 3 common cash flow problems

75% of struggling small business owners believe disorganization leads to productivity loss.  Instead of focusing on the task at hand, employees are busy sorting through paperwork. It’s essential to streamline AR/AP processes to keep things organized and increase productivity. 

One of the biggest downsides to the organization element is time lost. Accounting teams should be working on important tasks or at least fulfilling ones, not searching through paperwork looking for account names and numbers.

In fact, 72 percent of finance teams spend up to 10 people-hours per week, or 520 hours per year on AP-related tasks that could be automated, such as invoice processing, supplier inquiries, supplier payments execution, PO matching, new supplier registration, and payment reconciliation, according to CPA Practice Advisor.  

The benefit of automation: Diminished administration expenses

Digital payments significantly reduce reconciliation fees and effort. The total cost-efficiency gains could go as high as 500%. All this cost reduction naturally reflects in improved EBITDA.

Automating processes also tend to be a big morale boost within the accounting team. 

#3. Varying Payments Terms 

Traditional billing solutions are not designed to accommodate different payment terms, new pricing or new offerings. This means a backlog in offerings, difficulty in finding the right pricing and eventually delayed revenue. 

AR/AP automated solutions allow for flexibility. It allows customers different payment options. And it makes life easier for the accounting team in terms of payment reconciliation. 

Benefits of automation: Scale

AR/AP automation helps enable and support enterprise growth. Meanwhile, the accounting team transforms into a powerful centre for insight due to new tools built into accounting software that offer looks into customer behaviour.

Stronger vendor relationships are also a benefit. Delayed invoices or delayed payments will affect the relationship over time, but this will never be an issue by going the automation route. And the relationship will benefit and, in turn, positively affect the enterprise.

What’s Next? 

Here at VoPay, our innovative payment technology and verification tools meet AR/AP automation to create a complete financial solution to empower businesses to automate labour-intensive processes, maximize working capital, and facilitate faster cash conversion. 

All of the benefits of automation mentioned above are highlighted within VoPay’s products, as well as:

Improved customer loyalty 

With 86% of buyers willing to pay more for a great customer experience, CFOs are now revamping their age-old AR management practices to make it more user-friendly. With VoPay, organizations have experienced meaningful customer interactions through customer self-service options where users select and pay invoices from anywhere, anytime.

Advanced compliance 

With best-in-class payment technology and open banking verification solutions, enterprises can unlock better automation tools for digital payment processing. It also enables two-factor authentication, role-level access, and fund-on-file tokenization.

Zero-touch processing

With ‘zero-touch processing,’ companies can deliver invoices to customers with payment links. Remittance information is directly collected and matched to organizational codes with minimal manual intervention with the advanced OCR engine.

Learn more about the benefits of our products and how we help enterprises and enterprise AR/AP automated solution providers; contact us today.

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