How to Get Working Capital Revenue from Invoices Fast, Easy, and Safely
When a Small Business Waits on Invoice Payments, Cash Flow Crunches Follow. There’s a Better Way to Get Paid Immediately on Accounts Receivables for Positive Cash Flow.
Thousands of medium and smaller-sized companies earn their bread and butter not by selling directly to the consuming public (B2C) but by providing services and goods to other businesses (B2B). Others sell to local, state, and federal government agencies (B2G), and a lucky percentage enjoy a mix of both.
In either case, the business provider takes on financial risk by providing temporary merchant credit to the client. A transaction occurs, but instead of getting paid on the spot, the business draws up a billing invoice and then has to wait upwards of 30, 60, or even 90 days.
The problem with waiting for clients to pay 30-day invoices is the average time for payment for thirty-day agreements is sixty-five days!
Imagine the patience required for sixty or ninety-day invoices. If that doesn’t seem painful enough, small businesses are vulnerable to increasing calls from large companies for 120-day invoice payment terms. The situation leaves many entrepreneurs asking the question:
“How can my company cut invoice wait times and get paid immediately to grow my business?”
That question is the driving force behind intense efforts to research and develop a small business payment solution that serves the B2B and B2G community as effectively as the big credit banks do for commercial retailers selling to the public. We’ll look at available resources for extracting cash flow from invoices, then explore how to take advantage of the best one.
Accounts Receivables: How a Cash Flow Crunch Relates to Unpaid Invoices
In the early 20th century, trustworthy consumers conducted retail transactions like small businesses do today. A customer could walk into a store, establish a relationship with the merchant, then open a tab with the business to pay later rather than paying for goods and services just then. As long as the client remained responsible and reliable, they could continue with store credit indefinitely and even have family members use their account.
At some point, big banks stepped in so that rather than the bill being paid to the merchant, a shopper could use a bank-issued credit card. This resulted in the merchant getting paid immediately and the purchaser receiving time to pay by the bank, removing any pressure from the retailer. That works out well for companies selling to the public, but no big banks are stepping in on behalf of today’s small businesses selling to other businesses.
This leaves companies like yours working in an outdated business paradigm where you serve as a bank, taking the risk of spending your own money to provide a product or service without getting paid upfront. Without these types of necessary arrangements, small businesses that lack deep reservoirs of capital would collapse right along with the economy. That spirit of generosity is of no comfort, however, when you are stuck waiting day after day as demands for money needed in every part of your operations pile up.
So, instead of putting the fruits of your business labor into action to strengthen and grow your business, your company’s value is wrapped up in a billing invoice issued to your client in the hopes of recouping the money later. Your invoice then becomes an ‘Accounts Receivable,’ which means it represents money owed, awaiting payment. That does not mean your employees, suppliers, vendors, utility providers, insurance carriers, or lenders will wait for you. Instead, they come for their money. They don’t take your invoices as a form of payment.
Why Unpaid Invoices Put a Strain on Working Capital
Smart entrepreneurs always seek strength, sustainability, and growth, which they achieve through efficient cash flow management and building strong working capital in their company.
Working Capital is the lifeblood of any business, representing the level of funds and resources it has available to run day-to-day operations as well as grow, scale, and expand. Emphasis on the word, ‘funds.’
Your current liquid capital may have come from raising funds by way of borrowing or from outside investment, but the strength of your business hinges on the percentage of funds that result from collecting payments from your customers. Borrowed money is a liability. The only money that comes in from Accounts Receivables adds strength to both your cash flow and working capital position.
Unpaid Invoices Slow Down Cash Inflows
Potential income sitting static in the form of an invoice is not truly an asset until the client starts the payment process, typically through an ACH (Automated Clearing House) bank transfer, business credit card, or in some small percentage of cases, cash. Because your company has already spent capital in transacting business, some view the invoice as a liability, at least until it is paid.
Stacking one invoice atop another increases the scale of the problem and its effect on your working capital position, with each representing more money expended than received.
Borrowing money for working capital only to spend it without bringing in enough liquid capital through sales revenue is a recipe for disaster as it throws cash flow into imbalance. Why? Because the money for day-to-day operations has to come from somewhere.
Since the purpose of raising capital for your business is to use it to generate profits, the key component to its success is liquidity, meaning your highest priority after providing an excellent customer experience is to convert accounts receivable invoices as quickly as possible into cash sitting in your business banking account, ready for use.
Settling Invoices Quickly Creates a Stronger Working Capital Position
Your new Working Capital outlook will continually strengthen as you find ways to convert invoices into cash flow with increasing speed. The working capital picture is determined by measuring and subtracting your current liabilities from your current assets. Assets include how much liquid capital your company has on hand.
Since billing invoices are yet to be paid, you shouldn’t view them as assets until the money owed is en route. The faster you transform invoices into capital and the more consistently you work to shorten the average payment periods on 30, 60, and 90-day invoice terms, the stronger your working capital position will be.
A healthy working capital ratio wherein your assets outweigh your liabilities will provide ample room in your cash reserves to run and grow your business. A weak working capital ratio will find you scrambling to pay bills, struggling to retain talented employees, and being hassled by creditors.
The money to meet your numerous business obligations has to come from somewhere. If you’ve already taken out loans or a line of credit to set the wheels in motion, then relying on.
Why Unpaid Invoices Plug Up the Cash Flow Pipeline
Cash flow balance means that you have at least as much money coming into the business through sales to cover all expenses and leave room for further growth and investment. Since inbound revenue is the fuel that keeps the business running securely, any resistance or slow down to the inflow of cash should set cash flow alarm bells ringing.
Every account receivable invoice carries the risk of clogging up your cash flow pipeline, no matter its payment terms. For example, writing a $15,000 invoice for services rendered may feel good at the time of winning the project, but brings you nightmares when one of your suppliers is harassing you to be paid as the fifteen thousand-dollar invoice slips past its 30-day term and drifts into days 45, 50, and beyond.
Your company’s healthy cash flow becomes restricted as unpaid invoices accumulate. The last thing any small business wants is to have to reach into more debt in order to pay the bills because debt doesn’t improve your position. Using cash flow revenue from sales serves the purpose much better, meaning that paid invoices are the best resource for
Repaying existing bank loans, SBA Loans, or Line of Credit that you’ve taken out to keep the business afloat through start-up phases, initial growth spurts, and occasional seasonal trends such as ramping up people and resources for the holiday season.
Meeting payroll, insurance, health care, and other benefits so that you can attract, hire, and retain the best employees and workforce affordably.
Compensating your inventory suppliers and service vendors, whether they demand cash or credit card upfront or offer you payment terms in the same way you do your clients.
Purchasing or leasing facility space, office space, or meeting space for servicing, production, and administration.
The truth is your business needs that money as fast as you can get it. In the past, you might have been stuck with other companies patiently watching the calendar, but no longer. You have options available today that get you quickly on the road to a strong working capital position for growth and ready cash flow for daily operations.
Ways to Convert Current Invoices into Ready Cash
Knowing as we do the importance of getting paid faster than the extended terms usually allowed through invoicing, the business growth-enabling question to ask is,
“How Can My Small Business Get Customers to Pay Invoices Faster?”
Indeed, you can meet your business’s financial obligations by dipping into working capital derived from non-sales sources such as an existing business loan or line of credit, but then you’re digging your company further into a hole. The best solution for entrepreneurs looking to lower liability, eliminate slow payment issues, and improve their working capital position would have appealing features.
You need to get paid fast – immediately is even better. You want to be paid without filling out tons of paperwork.
You want the convenience of transacting business with other businesses in a way that feels like the ease and convenience of taking a credit card.
Your invoice payment option needs to be ‘No Risk.’ You don’t want to add more debt to your balance sheet. You do not want to put the company or personal assets up as collateral. Instead, you want effortless cash flow since the work has already been completed, hence, you have an invoice. Why work harder?
You are no longer interested in chasing down customers for payment and want that task taken from your job description.
You don’t want to jump through endless, frustrating hoops and want a process that is easy, simple, and backed by exclusive customer service assistance.
You want to choose exactly which client invoices to use for cash conversion.
You want the lowest fees, complete transparency, and for the process to be seamless.
You want the freedom to convert as much potential invoice revenue as you wish without penalties or hidden fees.
Finding the Fastest Invoice Payment Solutions – Good, Better, Best!
Invoice Factoring companies have been around for decades. Although they can be a convenience when you need badly to extract cash reserves from your invoices, factoring has suffered some public image problems. It’s not that every organization offering a factoring loan is a scam – not the case at all – but that a fraction has shown themselves to be less than responsible on behalf of the small businesses that end up carrying the weight of hidden fees, painful interest payments that cascade eventually into collections.
With factoring, you can sell your invoice for a discount to a company that will then attempt to collect it. Often, that can mean contacting your client even though the factoring company has no connection or relationship with them. When they call your client, it makes your company look bad. If they harass your client, it can blow up into a bad reputation for you. Factoring is often seen as the ‘pawn brokers’ taking advantage of small businesses.
The benefits of factoring include collecting money faster. In some cases, you can be paid 80% to 90% of the invoice value within a couple of weeks. Unfortunately, the rest remains out of reach in a process referred to as “holding back.” You get paid faster, but partially. The remainder, minus their interest and fees (the ones you know about), is paid after your client pays the invoice.
Remember the average time to pay a 30-day invoice being greater than 60 days? That could end up being very inconvenient.
There are plenty of actions you can take in your accounts receivable process to speed up average payment times and consistency. Some tactics, such as including the words, “Thank You,’ on the invoice, can result in measurable improvements, according to studies. Other steps might include:
a. Invoicing Immediately. Strike while the iron’s hot, so to speak. Bill your client while the memory of excellent products or services is still fresh.
b. Set clear payment terms. Just because the invoice has a 30, 60, or 90-day term does not mean you can’t mention early payoff days or incentives. Research has shown that politely mentioning earlier payoff options lowers the overall average payment time.
c. Offer to reward early payment. With this approach, you must be precisely clear because any claims can be held legally binding.
d. Institute penalties for late payment, but with complete politeness and in service to all your customers.
Honing efficiency and effectiveness in your invoicing and collections strategy means taking time away from what you’re best at (or paying someone to carry out the steps), but if you can get a 15%, or 25% reduction in the average invoice payment, it will make a huge difference for your working capital picture.
Accelerated Invoice Payments capitalizes on the technological advances in banking communication to provide everything you need to get paid immediately on invoices, whether you engage in B2B (business to business) or B2G (business to government) transactions. The best thing about it is that it is not a loan and not invoice factoring.
The #1 Accelerated Invoice Payment tool can be found with NowAccount. NowAccount is a patent-pending small business payment solution that lets your B2B or B2G company get paid immediately without suffering 30, 60, or 90-day delays.
Getting paid immediately on invoices changes everything for a small business because it keeps the ‘Sales’ end of the cash flow pipeline in the wide-open position so that you have the liquid working capital you need not just for day-to-day operations, but gives you the revenue you want to grow and scale your business fearlessly.
Through NowAccount, you qualify with a simple four-step process designed to set you up for immediate cash payments on accounts receivable invoices that would otherwise sit gathering dust as you await the money. This way, when your business has a need for cash, you’ll find it ready in the company account.
The Great Benefits of Using a NowAccount to Get Working Capital from Invoices
- Get Paid Faster. Your days of waiting 30, 60, or 90 days and longer are over. From here on out, you get paid on invoices immediately.
- The Convenience of a Credit Card. Imagine the exciting confidence you’ll feel while making out invoices in the future, knowing that, whenever you wish, you can take that invoice and turn it into cash with the convenience of a credit card.
- Transparency and Low Cost. With NowAccount, you don’t have to go into debt or tap into equity, nor rob Peter to pay Paul. Instead, you pay a small, one-time merchant fee. When you combine immediate payment with low costs, you end up with “the convenience of a credit card.”
- No Risk to You or Your Company. There is no need to put personal or company assets at risk, thus you eliminate exposure.
- No More Accounts Receivable Collections Frustration. If your client defaults on the invoice, we don’t harass you into harassing them. We’ll take care of it. That saves work and stress on your part.
- Easy, Simple, and Fast 4-Step Process. All you do is create your account, upload the desired invoice for monetary conversion, and get paid. Let everybody else wait. Your business no longer has to.
- Flexible Invoice Management. Your clients belong to your resource base. We do not require you to give us any invoices except those that you find strategically valuable for converting to working capital right away.
- Empowering Your Business. As a small business, your ability to pay your bills on time and earlier affords you the kind of leverage that can net you discounts and other incentives with your own vendors and suppliers. When businesses know that you have the means to pay early, they bend over backward to transact with you.
What Kinds of Small Businesses Use Accelerated Invoice Payments?
Most businesses that sell to other businesses or government concerns using payment arrangements on terms set forth in a billing invoice can benefit from creating and using the NowAccount Accelerated Invoice Payment System.
Trucking & Transportation companies, Staffing Agencies, Entertainment Providers, Wholesale Manufacturers, IT Services Firms, Marketing Companies, and others have stopped the unfair wait for revenue by using NowAccount. Thousands of businesses strengthen their working capital picture and maintain strong cash flow by foregoing the long wait for payment in favor of getting paid immediately. If you write invoices to clients and have better uses for the money than letting it lose value in the economy while you wait, see if you qualify and set your business on course to a better financial destiny.