The subject of cash flow has sort of an adjustable lever that variably aligns with the size and segments of business, but can also include other factors such as geographic market, general economic growth trends and so forth. So, for example, a Fortune 500 like ExxonMobil might think in terms of retained earnings available to buy back stock, while a mid-market firm like Pacesetter Steel Service might think in terms of free cash flow to offset the cost of capital if expanding the firm or investing in technology for operations. When you slide down to the small business segment, the very smallest will often be thinking of cash flow in terms of keeping the lights on. This piece, posted in ITProPortal, discusses SMB issues with managing late payments (particularly in the UK but generally applicable), and why business owners should be using available tech to help solve the problem.
‘Many business owners across the United Kingdom are reporting that getting paid late is more of a concern to them than the country leaving the European Union. Late payment is the problem that just won’t go away for small and medium-sized businesses (SMBs)…..Eight out of ten SMB bosses fear they may not be able to cover their own work-related bills because of being paid late by customers, according to our recent research. More than half have had to dip into personal savings or use emergency finance to pay their company expenses as a result. Yet, far too few realise that changing up your tech stack could in fact be the cure to this all-too-common headache.’
We tend to agree that supply is out in front of demand (we certainly see that in the U.S.) for cloud-based procure-to-pay solutions, either point (e-invoices, payables, etc) or comprehensive, but also see a clear trend for accelerated adoption in the coming several years. Latest gen tech allowing for easier delivery of invoices, e-payments options, remittance data matching and end-to-end convergence, is already available. At a very high level, sluggish adoption is often a matter distracted business owners, for whom the industry needs to make things very easy, after which they might find very grateful and loyal customers. According to the article, at the very least, reduced stress plays a role.
‘Summer is the worst time of year for getting paid, two-thirds of businesses say. In fact, almost half of SMB owners only take between one and two weeks of holiday a year because they’re too worried about payments to allow themselves time away from the business. One in ten has no vacation at all, our findings suggest….It’s no wonder that 41 per cent believe late-paying customers are having more of a negative effect on their operation – and mental health – than Britain’s imminent divorce from the European Union.’
The piece goes on to discuss various companies and technology solutions that can and should put small businesses in control of their cash flow destinies, a matter of survival for many. Since more or less a universal problem, with new solutions popping up all the time, worth a quick read.
‘Healthy cash flow, a reliable salary, paying staff on time, taking regular holidays and having funds available to invest in the business for future growth. All of these things can be achieved by embracing the advances that payment technologies bring. Brexit may be beyond the control of British businesses, but how and when they get paid certainly is.’
Overview by Steve Murphy, Director, Commerical and Enterprise Payments Advisory Service at Mercator Advisory Group