The Impact of Payer Behavior on Cash Flow Certainty
By Pinch Payments Be MPowered 2023 Bronze Sponsor
Understanding the root causes of cash flow uncertainty is crucial. In most cases, it traces back to the behaviour of your customers, specifically their payment habits. If your customers consistently delay payments or adopt a "pay when I feel like it" attitude, you're left with cash flow uncertainty.
Late payments don't just affect your bottom line; they also consume valuable time that could be better spent on activities like sales, marketing, system development, and serving more profitable clients. Moreover, chasing payments further depletes your resources.
Recent research by Xero unveiled alarming statistics: each year, big businesses in Australia delay payments to small businesses to the tune of $115 billion. While the economic impact is significant, the practical implications for small business owners are even more profound.
When your cash is tied up in overdue invoices, your ability to invest in growth is severely hindered. Survival becomes a daily struggle when you can barely keep the lights on.
Addressing Cash Flow Uncertainty
For mumpreneurs, addressing cash flow uncertainty is a pressing concern. If you have overdue invoices lurking in your accounting system, they are likely there for a reason:
- Your customer didn't perceive value in your service.
- Technical issues, such as email deliverability, led to missed invoices.
- Your customer faces cash flow challenges of their own.
- The intention to pay is there, but they haven't gotten around to it.
- Your customer follows internal payment policies on their terms, not yours.
In each of these scenarios, one common thread prevails: you accepted the risk of delivering services before receiving payment, effectively extending credit to your customers. Most of you are not banks, so why are you issuing credit?
Changing Payer Behaviour and Business Approaches
The key to achieving cash flow certainty is to change payer behaviour and, consequently, how your business approaches payments. Three crucial members of your team influence this change:
- Sales Team: Your sales team sets the initial impression and customer expectations. If your sales team's processes don't align with your desired payment terms, it's challenging to fix the issue.
- Invoicing Team: The person responsible for invoicing plays a pivotal role in influencing existing customer behaviour. They communicate with customers through invoice emails and reminders, often triaging incoming account inquiries.
- Payment-Chasing Team: The payment-chasing staff, often tasked with dealing with problematic payers, are crucial for ensuring timely payments.
Achieving cash flow certainty demands a shift in how these team members approach payments and equipping them with improved systems and processes.
Embracing a Pre-Approval Invoicing Model
To tackle cash flow uncertainty head-on, consider transitioning to platforms like Pinch Payments, with a specific focus on Pre-Approval invoicing models. A Pre-Approval is a binding agreement between your business and your customer, allowing you to charge a designated payment method automatically with direct debit or online credit card payments.
With a Pre-Approval set up within Pinch and integrated with accounting software like Xero, QuickBooks, MYOB, or third-party platforms, you can seamlessly collect payments on the invoice due date.
Embracing a 100% Pre-Approval model for both new and existing customers eradicates the waiting game, ensuring you receive payments promptly. While some customers may initially have reservations about granting such authority, you can overcome these hesitations with clear processes, alignment across your team members involved in the invoicing process, and a commitment to achieving cash flow certainty.
Cash flow certainty is the cornerstone of financial stability and growth for mumpreneurs. It empowers you to run your business with confidence, free from the nagging worry of overdue invoices and the associated stress. By addressing payer behavior and embracing innovative invoicing models like Pre-Approvals, you can unlock the path to financial certainty, enabling your business to flourish while enjoying the peace of mind every mumpreneur deserves. Schedule a demo of Pinch here.