“Cash flow is the lifeblood of any business” – we’ve all heard the phrase, to the point where it’s been accepted as common wisdom bordering on cliché. It’s easy to understand why when broken down into the most basic business principle. No matter how big your business is, if you run out of cash, the game is over.
Add to this that virtually all business decisions culminate in the transfer of value, typically represented by the need to collect or pay money, and it becomes clear why cash flow is so closely tied to the health and well-being of any business.
Whether you’re selling the latest smartphone, buying shares in a vendor, acquiring a new office block, or financing a subsidiary in a foreign market, every transaction needs a way to settle. However, markets are complex, global and competitive. There is a vast ecosystem of providers and a myriad of financial services and payments solutions that cater to the simplest of problems: how to move money from A to B efficiently and safely.
Reduce risks for e-commerce businesses
Finding the right payment tool is only part of the problem, effectively executing a solution that drives business value is by far the biggest challenge. Companies must find a way to overcome complexity in order to take advantage of enormous opportunities and provide their customers and suppliers with more meaningful and direct ways of doing business. What works for a small company trading locally in a single state is unlikely to be suitable for a multinational with complex structures and supply chains that need money to move around the world.
What these companies have in common, however, is the need for flexibility and agility in how they operate, allowing them to grow and adapt quickly as business and market conditions change.
Much has been written about the collection side of an exploding e-commerce environment accelerated by the recent pandemic. Providing choice and flexibility is a great way to promote higher sales conversion and resonate with new market entrants. An equally important but often overlooked aspect of any business is the ability to optimize payment capabilities to bridge the gap between receipts and payments, thus maximizing cash flow, reducing risk and delivering exceptional payment experiences. third parties.
Increase consumer loyalty
The pandemic and accompanying financial challenges prompted companies to rethink their strategic payment capabilities and implement long-term solutions to strengthen their balance sheets and promote efficiency. According to the PYMNTS report (opens in a new tab)71% of CFOs said they have increased their use of digital payments since 2020.
Digital credit card payments have become particularly popular, followed by digital payments made via direct deposit and alternative solutions such as PayPal. The importance of digitizing payments extends across industries.
Still, finance and insurance face particular pressure to optimize their payments systems to improve processes, customer experiences and cash flow.
Interestingly, they are also the ones that have seen the most significant improvement in working capital and data security since the start of the pandemic.
Despite the growing awareness and enthusiasm of companies to improve their payment systems, the complexity of the ecosystem makes digitizing payments a challenging journey. With hundreds of different payment methods, thousands of payment processors, and new technologies emerging daily, payments are far from simple.
More payment options equals more paying customers
Navigating this topic requires expert-level payments knowledge and experience, which most companies do not have the ability or inclination to develop in-house. The complexity of technologies, business processes, efficiencies and risks inevitably come to the fore when designing an optimal cash management system. These challenges, however, often end up stifling innovation and slowing the speed at which initiatives can be implemented.
Creating exceptional business performance requires a focus on the collection (accounts receivable) and payment (accounts payable) capabilities each business is exposed to.
Maximizing supplier payment terms and minimizing collection time is no longer the only consideration for a company. Offering a wider variety of payment methods, automation, and integrated financial products has the potential to increase the potential size of the target market and deliver a host of benefits, including reduced risk, better sales conversion, improved margins, happier customers, and a healthier, happier supply. chains
When it comes to customers, offering a wide variety of payment methods that best suit their individual needs significantly improves the likelihood of a sale. This not only benefits the bottom line, but also increases customer satisfaction and retention rates.
Similarly, offering flexibility in AR solutions increases the likelihood that a payment will be collected, minimizing bad debt and improving the cash cycle.
It’s no longer just about a smooth checkout process; companies must meet the payment needs of their customers and offer them the methods they want in the way that suits them best. Ultimately, with overwhelming competition and high standards set by innovative industries like e-commerce, customers are looking for companies that can offer the full package.
The lack of payment options may be enough for them to seek services elsewhere. The customer experience is all-encompassing and involves a number of essential factors. Companies must differentiate their offer with flexible collection, reimbursement, payment and reward offers. They are proven to increase customer satisfaction, conversion rates, and loyalty.
Understand what payment options to offer
Embedded financial services is another excellent opportunity for companies to leverage their specific knowledge base of customers and vendors to launch their own financial services offerings. This could make the customer journey more accessible, faster, and more convenient—precisely what customers want from whatever service or product they buy.
In addition to providing a better overall customer experience, integrated finance provides a variety of benefits for businesses, such as increasing cross-sell opportunities, maximizing revenue, and increasing margins while using data to reduce risk. Despite being a relatively new concept, integrated finance is already valued at $22.5 billion in the US and is expected to grow nine times as much by 2025, according to a Statistical report (opens in a new tab).
Automation is another critical piece of payment digitization. Businesses need to look to technology partners to help automate and simplify manual payment-related tasks and business processes and reduce the complexity of back-office functions such as accounting and reconciliation.
Reducing reliance on manual data processing and moving payment data to the cloud allows companies to save on human resources and makes data loss or mishandling much less likely. Ensuring that all payment information is easily accessible and automating most of these processes is key to better overall cash flow management and significantly improved analytics capabilities.