Easy Cash Flow to Your IT Business Using Client Invoices
How to Use Existing Invoices for Faster Cash Flow and Working Capital.
The faster your IT firms can turn an invoice into liquid capital, the better your incoming cash flow and the stronger your company’s working capital reserves. So the real question is, “How can an IT company offer extended payment terms but get paid far earlier, as in a couple days or so?”
Converting unpaid client invoices into liquid capital is the fastest way for IT and Digital Technology companies to improve inbound cash flow and available working capital. When IT companies offer extended payment terms with invoices, cash flow can suffer if invoices are paid late. The fastest invoice payment options include invoice factoring, invoice buying, and, best of all, accelerated invoice payments using the most modern financial tools.
Running an IT business can be very stressful, and part of that stress comes from struggling to get clients to make their invoice payments on time. In an unpredictable economy, the riskiest financial move made by IT & Digital Technology companies is to issue extended payment term invoices to business and government clients.
Doing so makes sense in stable economic times, but when your clients have difficulty making invoice payments in an economic slowdown, sitting on unpaid invoices can result in delays or default. When clients pay slowly, your company is inconvenienced because so many bills and obligations pile up during your 30, 60, or 90-day wait to get paid.
Unpaid Invoices Lead to Cash Flow Crunches for IT Firms.
Because you’ve already expended money, time, and energy to deliver your product or service, you’ve essentially extended merchant credit to a client. The client owes you, but you owe others who do not issue extended payment terms.
An unpaid invoice sitting in your Accounts Receivables is a virtual financial liability. Until the client finally pays the bill, the face value of the invoice represents a working capital investment awaiting a profitable return. In an economy as uncertain as the one we’re currently in, with its inflation and price hikes, every invoice loses value to some degree, and a waiting period of months can result in a value loss in the hundreds or even thousands of dollars.
An invoice is not cash flow, nor is it working capital. Most small businesses cannot long afford to wait 30, 60, or 90 days to get paid in a bad global economy racked by supply chain problems. When bills start piling up, your company is in a far better position when invoices are paid within a day or two versus months or weeks. When your small business gets paid almost immediately, you enjoy the freedom to fund day-to-day operations and grow and scale. When cash flow is liquid, you can comfortably pay business costs that cover the following:
Staffing & Recruiting
No matter how effectively skilled your IT team is, heavy project task loads might require additional talent on either a temporary outsource or a permanent basis. Having lots of working capital on hand to pay better than competitors is very helpful for attracting the brightest talent.
The less restricted your inbound cash flow, the easier it is to onboard new hires or pay staffing agencies for strategically using their freelancers.
Developing Software & Cloud Computing
Many IT businesses generate revenue through software development, including software applications and customized programs for business and government clients. Firms also develop solutions for B2B (Business-to-business) and B2G (Business-to-government)clients to operate more efficiently, effectively, and profitably in the Cloud.
Software and programming projects cost money and must be well-funded to plan, start, sustain, and grow.
Technical Equipment & Supplies
Suppose your IT company also sells computers, servers, and other equipment and accessories as a revenue stream. In that case, it is likely that you also provide service and support, with that as a source of revenue on top of sales. Even with today’s easy online ordering, keeping some technical equipment and supplies stocked in inventory is a wise move.
One reason for this is the post-pandemic supply chain disruption problem. Keeping some inventory on hand can mean the difference between making a satisfactory sale and losing out on an opportunity for lack of access to the materials, supplies, or equipment necessary to deliver goods and services.
Cybersecurity & Data Protection Services
Cybersecurity is expensive, and the talent required to do it effectively does not come cheap. Businesses have never suffered the financial and competitive dangers lurking in the digital space. Hackers, phishers, spammers, and scammers proliferate the seedy underbelly of the dark web working ceaselessly to find a to steal from, interfere with, or disrupt business operations.
Not only do you have to fund the logistics, equipment, and personnel to combat the problem for your own company, but you also generate a revenue stream by providing similar or related services to clients. Fresh, easily-flowing revenue streams are necessary to acquire cybersecurity resources so that they are ready for your benefit and to provide profitable services to your clients.
Every unpaid Account Receivable invoice runs the risk of slow pay or no pay. Every invoice that does stumble into slow pay territory makes funding new projects more difficult because of a lack of working capital. Sure, you value client relationships and enjoy taking on new accounts, but you need to find a way to get paid much earlier than the extended payment terms of the invoice.
Three Ways IT and Digital Technology Companies Get Paid As Fast as Possible
Invoice Factoring – or ‘Factoring.’
Megacorp Invoice Discount Purchasing.
Accelerated Invoice Payments – or ‘Rapid Invoice Payment Technology.’
Small businesses have reluctantly relied on invoice factoring companies for decades as an accessible but risky and expensive option for converting invoices into capital for paying bills, staff, and suppliers.
While invoice factoring sometimes carries a pawn-shop level of distrust, thousands of companies have managed to keep the doors open during an emergency by factoring at significant discounts, high fees, hidden costs, and other negative outcomes. If you can avoid the higher costs, murky fine print, and being held liable if clients default, then factoring could be worth a consideration.
Two things to watch out for in addition. First are factoring companies that do “hold back” on your invoice face value by giving you only a percentage of its worth. The second is paying the remaining balance only after your client has fully paid the bill. This is a significant problem when you need as much of the money you’ve earned as you can get.
Facebook and other multi-national companies are now using their vast financial resources to earn profits from small businesses like yours by tapping into your entire client base and offering to partially fund an invoice or buy it outright at a significant discount. Some of these programs are highly specialized, with stringent qualification requirements that can be just as difficult to navigate as trying to get a bank loan.
So issues that come from invoice discount purchasing include the fact that they refuse to compensate your company for the data used and gathered. Companies like Meta demand access to your client information so that they can pick and choose which invoices are best for their company and not yours. If you refuse, they won’t pay you, and they can still use the information you provide to get to your clients. Some invoice discounters also hold back on invoice face value and demand business collateral and personal guarantees that don’t sit well with entrepreneurs who want fewer obstacles, more flexibility, and lower risks.
Modern financial technology systems and networks have evolved drastically over the past two decades. At the leading edge of the paradigm shift in small business funding is NowAccount, an invoice payment system that takes weeks and months off the wait to get paid. NowAccount pays so fast and at such a low cost that it seems about as convenient as accepting credit card payments.
The ultramodern NowAccount financial network was built by entrepreneurs for small business owners who understand the importance of being able to offer extended payment terms to clients yet get paid rapidly, regardless.
How One IT Company Boosted Cash Flow to Win Bigger Contracts
Converting unpaid invoices into liquid revenue as fast as possible is the most empowering financial move a small business entrepreneur can make. Let’s use McCay-Jones IT Consultants North as one example of how rapid invoice payment completely changes the playing field.
When the opportunity arose to win a big contract to provide IT services for a professional sports team, McCay-Jones IT Consultants North found itself in a tight situation because it needed immediate working capital to acquire staffing, equipment, and other tools to meet contract demands if awarded. The problem arose because, although there were plenty of clients, many worked exclusively through invoicing with 30, 60, or 90-day payment terms.
The more invoices issued, the less working capital was at their disposal because they were spending it on delivering goods and services to existing clients who didn’t have to pay upfront. Client-rich but cash-poor, the owner sought answers on the fastest way to get paid on B2B and B2G invoices.
After researching invoice factoring companies and invoice purchasing programs and finally learning about the accelerated invoice payment technology provided by NowAccount, she decided that the newest financial technology is the fastest way to get paid for their business. Thus, she chose NowAccount, and her problem was solved in several ways.
- Invoice payments are so fast it’s immediate. While her IT company had lots of experience working with extended pay invoices, none involved getting paid within a matter of only a few days. On average, McCay-Jones IT Consultants North found that a 30-day invoice got paid in 60 to 65 days in the harsh post-pandemic economy. With NowAccount, she can upload her invoices and get paid within a couple of days once approved.
- No holdback on an invoice’s face value. Holdback happens when an invoice factoring or discount purchasing business intentionally gives you only partial worth on your invoice value. For example, if she submitted a $35,000 invoice to a firm that only gives 85% of its value, then she’d get around
- Pre-qualification was easy and over in minutes. With a simple, comfortable four-step process, she received a fast pre-qualification that didn’t require much paperwork, background checks, credit checks, or other hurdles that traditional lenders employ.
- Flexible invoice uploading. Unlike invoice factoring and purchasing companies, NowAccount allows you to submit only the invoices that support your strategic financial objectives. You do not have to open your entire client list and can maintain business privacy.
- One-time Small Flat Fee, Terminate Anytime. There are no hidden fees, disguised interest, or unexpected costs associated with NowAccount. With the convenience on finds in credit card transactions, each invoice quickly paid is charged only once with a small merchant fee. Because you get paid rapidly and do not have to wait for weeks, issuing extended payment term invoices transforms from a risky cash flow chokepoint into a profitable, reliable source of liquid capital.
- The non-Recourse inflow of working capital. Traditional lenders and alternative funding sources can demand personal guarantees or business collateral as a backup in case your client pays too slowly or defaults. Many will hold you and your company personally liable and insist that you chase down and hassle your customer on their behalf. If that weren’t bad enough, some would even insert themselves into the client-business relationship to gain an advantage. NowAccount is a ‘Non-Recourse’ cash flow option, and you won’t be held responsible for any collections, the burden removed from your shoulders.
- Dedicated account manager. Not having access to competent human help when you have a financial question is frustrating. NowAccount assigned an outstanding account manager to McCay-Jones IT’s account to answer any questions and walk her through any parts of the process needing review. Knowing that there is someone at her funding resource who knows her name gives her confidence.
- Better competitive position. Thanks to her new accelerated invoice payment connection through NowAccount, her company was able to convert tens of thousands of dollars in invoices into immediately-useful working capital. With that strong cash flow, the company successfully submitted a competitive bid and had no problem meeting the demands of the contract that was awarded.
Bypassing the standard long wait for payment on B2B and B2G invoices allowed McCay-Jones IT Consultants North a level of financial strength and flexibility unavailable to IT companies that wait around for weeks. Getting paid rapidly using the latest financial technology immediately improves cash flow, empowering your business to fund projects, get more clients, handle day-to-day costs, and boldly grow and scale your business. Take the first, easy step to free up your IT business cash flow with NowAccount.