The information in this article was taken from the web seminar on the “Technology and Evolution of Cash Flow Management.” The seminar was hosted by Accounting Today and sponsored by Fundbox on May 21, 2015. The presenters were Jordan MacAvoy , VP Marketing at Fundbox, David Tulkin, Business Development Manager at Fundox, and Jody Padar, CEO & Principal of the New Vision CPA Group. The National Registry of CPE Sponsors offered CPE credit for attendees of the live seminar.

Small business owners have to meet many challenges, especially managing their day-to-day cash flow. In this seminar, the presenters covered some of the specific problems business owners are dealing with and offered practical solutions for invoice management.


The Problem with Net 30/60/90

Businesses should at least have three months of cash on hand to cover all operating expenses. That’s because for small business owners, it’s difficult to predict when money comes in. This is true even if you have a successfully growing business because of the delay in payments from your customers.

Small business owners aren’t the best at preparing for the inevitable scenario when expenses exceed income. Most of them only have one month’s worth of operating expenses on hand. And according to the National Federation of Independent Businesses, “64% of small businesses have invoices that had gone unpaid for at least 60 days.”


Cash Management Challenges Faced by Small Businesses

According to a Small Business Cash Management Survey conducted by Visa in 2012, these are the specific cash management challenges small business owners have to meet:

  • Receiving and collecting payments
  • Cash flow
  • Managing and moving funds
  • Making payments and disbursing funds
  • Determining available funds
  • Interest rates

Unfortunately, small businesses aren’t profitable for banks, because over 70% of small businesses want loans below $250,000. Banks like to lend larger sums of money, because the underwriting process of giving out small loans is just as complicated as the underwriting process for big loans. Banks also tend to look at the credit of the small business owner instead of the cash flow of the company as they do with bigger businesses.

Community banks used to take care of small business needs and loans. But community banks are not as common as they used to be with mergers and consolidations. This means small business loans are an underserved market.

Another challenge for small business owners is that payment terms are constantly extending further out. Instead of the customary “Net 30-day” terms, the payment terms get pushed out to 60 or 90 days. Big companies are passing along the late payment policy to the small businesses, making things especially difficult for the bottom of the chain. In fact, for large companies extending the payment terms for their vendors is a common method of increasing their credit and financial cushion.


Optimizing Your Processes

It’s important to understand that the cash flow process starts before the invoice. How your small business manages their operations, create invoices, issue invoices, and follow up on invoices that were sent, directly affects your cash flow.

An important part of managing your operations is tracking your time accurately. This includes tracking the time a project takes to ensure that you’re charging the right amount for each project, as well as tracking the time your employees spend working on different projects. Tracking your time accurately helps your company switch easily from one project to the next and allows you to more accurately estimate how long it will take to accomplish a project. This allows you to adjust your resources accordingly and ensures that you can estimate costs ahead of time and bill your customers accordingly.

Your company should also send invoices electronically in order to ensure instant and secure delivery. This reduces costs, increases the convenience for your customers, automates follow-up, and means your company spends less time on processing invoices.

Sending out an invoice electronically is only the first step in the process. In order to help small business owners to get paid, they should also offer online payments to their customers. This allows small businesses to automatically reconcile invoices and payments, create recurring payments, accept a variety of payments, and get paid within days instead of weeks.

Last but not least, it’s important to implement a solution to follow up on your invoices. Follow-up reminders can be automated and customized by customer type. Automatic reminders can also be integrated with your accounting program. Plus, you can directly collect payments from your follow-up reminders.

Other ways to update your invoicing processes include offering incentives in the form of percentage discounts for early payment, offering your customers detailed information about their account, and charging interest fees to the customers that can never pay on time. Of course, it doesn’t hurt to thank customers for paying your invoices, either.


How to Apply this to Your Small Business

To sum up, managing your invoicing process is the key to managing your cash flow and keeping your business afloat throughout the year. In order to generate and send invoices to your customers efficiently, your company can use eFileCabinet in conjunction with third-party software like QuickBooks.

The invoice workflow is probably one of the most important workflows you have to manage. Fortunately, eFileCabinet makes managing your invoices easier from creation to follow up. You can even search your invoices by keywords if you save them to eFileCabinet. Plus, every time you save a transaction in QuickBooks, you have the option to store supporting documents inside of eFileCabinet, including shipping documentation or a printed invoice. Invoice management has never been easier.

Give eFileCabinet a try today and see how it will transform your invoicing process. Simply fill out the form on this page to start your 15-minute demo.