Ola Polczynski 10 December - 5 min read
Today, cash flow is the leading cause of business failure. In fact, 30 per cent of businesses say they only have enough cash flow to survive for three months or less. Late payments and uncertainty in debt recovery contribute to cash flow problems in SMEs. Not only does restricted cash flow mean businesses need to cover the shortfall of working capital while waiting for payments to process, but it also holds businesses back from growing altogether.
What exactly are Workflow Payments?
Put simply, think about Uber, or any other ride-hailing service you have used. You book a ride on your app, the driver picks you up and upon arrival at your final destination you will automatically be charged to your nominated credit card. It’s the same concept but applied in a business to business context. Workflow Payments enable businesses to automatically take payments following the completion of a job or when a pre-set status is met, removing the need to chase payments. We recently wrote a blog recently explaining what Workflow Payments are, and today we’ll take a look at how it helps to solve cash flow issues for businesses, and in effect, allow them to sell more.
What Workflow Payments does for cash flow
At Spenda, we recognise the significant positive impact that the right payment systems and processes have on businesses. Workflow Payments bring the kind of flexibility that enables businesses of all sizes to better understand and predict their cash flow. They can visualise who they owe money to, who owes them money, and what cash resources they currently have available.
The Business Payments Solutions Provider (BPSP) agreement coupled with the Workflow Payments concept gives businesses an easier way to trade with each other. And under the ‘Intent-to-Pay Framework’, businesses can collaborate on a repayment plan, otherwise known as Buy Now, Pay Later, and automate everything so the supplier knows when they will be paid and both businesses have a better view of their cash flow. Our collaboration framework is focused on connecting the buyer and seller through ledger-to-ledger integration to ensure they are working from a single source of digital truth.
Businesses will have the ability to realise faster payment times, along with providing a seamless experience for customers. By establishing the right tools and processes that enable pre-authorisation of credit cards, payments can be processed more efficiently.
Key benefits for businesses include:
Chasing late invoice payments is a burden for any business, and still, more than half of B2B payments in Australia continue to be processed late, costing businesses, on average, $115 billion every year.
When you’re running a large operation with hundreds of invoices processed each month, the resources required to manage your payments grow quickly, especially when ageing receivables become a problem. While customers may not pay their invoices for various reasons, it happens too often, causing a range of challenges and increased risk.
Digital payments helped businesses get paid safely and efficiently throughout the COVID-19 lockdowns and associated restrictions. But as economies reopen many challenges still face businesses including supply chain disruptions, the ‘great resignation’, rising inputs such as fuel, and the expense of reopening. These business challenges make now an opportune time to build on the processes optimised throughout the pandemic, especially across B2B trade.
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