Using E-Invoices to Improve Cash Flow in Uncertain Times

July 9, 2020
Average Read Time: 2 minutes

As companies seek to restore cash flow levels during these uncertain times, accounts receivable (AR) professionals are identifying new ways to bring money in. Some key trends have emerged that can impact your financial operations when it comes to invoicing and payments. To improve cash flow during these uncertain times, follow the "three Cs:" Checkless, Contactless, and Convenience.

Modernizing the way you invoice customers and accept invoice payments addresses the "three Cs" and speeds up bill payment cycle time frames. This approach can help improve your days sales outstanding (DSO). DSO represents the number of days it takes to convert your outstanding accounts receivables into cash.

Reducing DSO means you get paid faster, giving you more control of funds. Having more control enables you to:

  • Pay your employees
  • Invest in new business lines
  • Reduce the risk of collections
  • Satisfy shareholders

In this post, we'll outline some ways to improve your high DSO by moving from an outdated paper-based invoicing model to an online invoice model.

Electronic Invoices (e-Invoices)

E-Invoices, including mobile invoices and web invoices, can be sent to your customers as soon as your accounts receivable team generates them. Paper invoices with printing and mailing costs, plus snail-mail delivery delays, become a thing of the past. Compared to conventional invoice processing, automated e-Invoicing results in cost savings of 60 to 80% in most cases, notes a Billentis report. And OpenText indicates on-time payments typically improve by 15 to 59%.

Pay Now Buttons and Pay Links

Add Pay Now buttons or pay links to e-Invoices, taking customers to your hosted payment page where they can instantly and securely pay their bills. Payment links reduce friction in the payment process while encouraging them to pay immediately, without distractions and without the hassle of paper checks. You can reduce manual check handling and processing costs.

Consider the improvements to your DSO if 5, 10, or even 25% of your invoices were paid immediately instead of a 30-day cycle time frame.

Payment Options

Offering more convenient ways to pay digitally using credit cards, debit cards, and ACH bank transfers are more important than ever before. The Federal Reserve of Atlanta’s 2018 Diary of Consumer Payment Choice indicates 1 in 4 bill payments in the United States are being made with a credit card or debit card, and that more than half the value of all bills (53%) are paid using some type of electronic payment instrument.

A 2019 Federal Reserve Payments Study reveals that, for the first time, the number of ACH transfers exceeds the number of check payments made. Your customers want to use digital payment methods that make the most financial sense based on individual circumstances and demographic preferences. When you provide more payment options, your customers are more likely to pay and to pay on time.

The Bottom Line? E-Invoicing is one way to help reduce high DSO and improve cash flow. The icing on the cake is that these moves have the potential for lasting impact in times of normalcy and in times of uncertainty.

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