How Electronic Invoicing Accelerates Cash Flow

Is your organization feeling it?  The combination of high inflation, market volatility, geopolitical tensions, and unpredictable global supply chains are putting the squeeze on corporate cash flows. 

Efficient cash flow management is crucial in uncertain economic times like these.

One way that organizations can accelerate their cash flow is by delivering customer invoices electronically, instead of through traditional mail channels.    This article shows you how electronic invoicing accelerates cash flow.

The importance of cash flow

Cash flow is the lifeblood of any organization. 

An organization’s cash flow encompasses the inflow of revenue from sales, investments, and financing as well as the outflow of expenses such as salaries and inventory purchases.

A healthy cash flow is essential to paying billers and sustaining day-to-day operations, meeting payroll obligations, investing in growth opportunities, and navigating an economic downturn.

Economic uncertainty can impact an organization’s cash flow in several ways.

• Reduced customer demand. In uncertain economic times, customers may prioritize paying essential expenses such as payroll over invoices from billers, resulting in potential delays.
• Decreased sales. Economic uncertainty can drive down business investments and customer demand for products or services, reducing a biller’s revenue stream and cash flow.  Similarly, organizations may delay or scale back investment projects or expansion plans during periods of economic uncertainty, further impacting demand for goods and services.  
• More bad debt. Collecting outstanding receivables is harder in tough economic times as the risk of customers defaulting on payments or declaring bankruptcy increases significantly.  
• Tight credit. Financial institutions tend to tighten their lending during tough economic times, making it hard for organizations that rely on lines of credit to fund their operations.  
• Unpredictable supply chains. In tough economic times, billers may have difficulty receiving the raw materials or inventory that they need for production.  Supply chain issues can disrupt production and order fulfillment, making it hard for billers to maintain cash flow.

The cash flow challenges created by economic uncertainty are even greater for organizations that import or export goods in global markets and must manage volatility in currency exchange rates. 

Navigating these challenges requires organizations to develop proactive cash management strategies.

How paper invoices impede cash flow

Delivering customer invoices through the mail can impede cash flow in several ways.

• Preparation delays. Approving, printing, and mailing invoices can take a lot of time – up to a week in some cases.  Delays in preparing invoices extend the time to collect receivables. 

• Slow delivery. It takes days for an invoice to reach a customer through the mail, delaying the start of the payment process.  And it’s not unusual for mail to become delayed because of bad weather, holidays, seasonal spikes in mail volume, or delivery to the wrong recipient.

• Manual processing. Most accounts payable departments lack automated solutions for converting paper invoices into digital images that can be efficiently processed.  That means accounts payable staff must key invoice data, match it against purchase orders, chase down approvals, and re-key information on approved invoices into their organization’s ERP.   

• Poor visibility. Paper processes don’t provide billers with visibility into the status of their invoice, or whether their customer even received it.  That makes it difficult for billers to accurately forecast their cash or proactively manage the collection of past-due receivables.

Delivering customer invoices electronically overcomes these cash flow challenges.

What is electronic invoicing?

Electronic invoicing digitizes and simplifies the delivery of customer invoices.

In an electronic invoicing environment, billers can automatically load invoices into an online portal for customer review and payment.  Billers can then track the progress of their invoices from delivery to approval and payment in real-time.  Customers can also upload electronic copies of invoices they receive directly into the portal, can easily select and pay the electronic invoices using a variety of methods, and research past invoices. 

How electronic invoicing speeds cash flow

Electronic invoicing accelerates cash flow in the following ways:

• Accelerated generation.  The best electronic invoicing solutions enable billers to generate electronic invoices, or for customers to upload electronic invoices, with the touch of a button, eliminating the costs of paper, printing, postage, along with speeding up delivery.

• Faster customer receipt.  Electronic invoices are delivered instantly, eliminating the delays associated with traditional mail delivery and expediting the invoice-to-payment cycle.

• Streamlined customer processing.  Compared to paper invoices, electronic invoices are easier for customers to process, clearing the way for faster payment initiation.  Data from electronic invoices can be extracted with a high degree of accuracy and can be effortlessly routed to the right individuals for approval. 

• Improved customer experience.  The best electronic invoicing solutions make it a snap for customers to receive, review, and pay their invoices.  Some electronic invoicing solutions also provide customers the flexibility to pay via ACH or credit card.

• Better visibility.  The real-time visibility of invoice statuses from delivery to approval and payment built into electronic invoicing solutions eliminates guesswork when it comes to forecasting cash and proactively managing receivables

• Touch-free reconciliation.  The best electronic invoicing solutions provide billers with rich remittance details, making cash application a breeze and speeding access to working capital.

Build financial resilience

Effective cash flow management is imperative for long-term financial resilience.  Delivering customer invoices via standard mail impedes cash flow and makes it difficult for organizations to proactively manage their working capital.  Electronic invoicing not only enhances operational efficiency but also accelerates cash flow and helps organizations navigate an uncertain economic environment.