Times May be Changing but the Importance of Cash Flow Isn’t

The questions without easy answers are the ones that keep finance leaders up at night.

And no question is perhaps more responsible for CFO insomnia than the ever-present question of “When will I get paid?”

That’s because payment timing depends on a myriad of factors, including industry dynamics, economic cycles, and the intricacies of payment processes — each of which are generally in flux at any given moment.

But while there is no one-size-fits-all answer to the question of when payments will be received, there are certain steps firms can take to help streamline the process.

“Making it easy to pay, giving clarity on what needs to be paid and providing different ways to pay will help accelerate the answer to when an organization will get paid,” Robert Purcell, CFO of Billtrust, told PYMNTS.

Streamlining the payment process and offering multiple payment options can significantly enhance the speed of payments, but taking a step back and working to understand the macro environment in which a customer operates can also pay dividends and puncture historical opacity.

“Understanding the economic challenges that your customers are in, whether they actually have unique cash flow constraints, what their leverage is, what their liquidity is, and how they are operating in their competitive environment are all crucial to getting paid,” Purcell explained.

This knowledge allows finance teams to tailor their payment strategies based on the specific circumstances of their customers, ensuring a smoother payment process.

Understanding the customer’s payment process is equally vital. Purcell highlighted the importance of comprehending the customer’s internal processes, saying, “If they have a very robust process and it goes through multiple steps of approval before getting paid, it’s good to know that.” Finance leaders must be well-versed in their customers’ payment processes to navigate them effectively and anticipate any potential delays.

Strategies to Accelerate Payments and Ensure Smoother Cash Flow

Invoice accuracy is another critical factor in expediting payment. Purcell emphasized the need for precision and clarity in invoices, stating that “it seems obvious, but being accurate and crisp and clear in what you’re invoicing for will speed the payment up.”

Mistakes or discrepancies in invoices can lead to delays and frustrations for both parties involved, so attention to detail is crucial.

“Over the last three to five years, there’s been a tremendous change,” said Purcell. “But the one thing that hasn’t changed is cash flow.”

That’s why it is crucial for organizations and CFOs to adopt the most effective strategies that can help accelerate payments and ensure smoother cash flow management.

“Customer experience is everywhere now, particularly within finance and accounting — it is integrated into how you pay your bills and it’s how you receive your cash flow,” Purcell said. “It’s how you create less friction, how you provide more options to pay, and how you establish an open dialogue.”

“The number of times you talk to your customer should not revolve around, ‘Hey, we have a price increase.’ It should be, ‘How are you doing? What could we do better to serve you?’” he said. “Having a great customer relationship has never gone out of style.”

Improvement Along the Order-to-Cash Process Is Continuous

The quest for timely payments in the commercial and business-to-business (B2B) space is a complex endeavor, and as technology and innovations like artificial intelligence (AI) continue to evolve, they are increasingly impacting billing and payment processes.

“The use of technology, from a digital transformation perspective, is one of those ways to unlock trapped potential,” explained Purcell. “Embracing a continuous improvement mindset is absolutely critical. Personally, I want to work with firms that are moving faster than I am. I think that’s a really valuable thing.

“Utilizing AI has evolved too, and there are some amazing advancements that I only see accelerating. I don’t think innovations like AI will be a passing trend,” he said. “Effective collection strategies that automate as much as possible can help finance teams move toward a more strategic mindset and focus on higher-level tasks beyond the manual side of things.”

Finance leaders must adapt to these changes and leverage technology to improve payment efficiency and enhance customer satisfaction.

“I like to tell our teams to identify the friction points and then solve for each one of those because that’s what will make a difference,” Purcell said.

As for the Billtrust CFO’s other pieces of advice to finance leaders?

“A robust, dynamic cash flow forecast is one of those other things that never goes out of style, Purcell said     ”

Beyond that, he added that it is crucial to “let technology do what it does best.”

“CFOs can use our brains for rationalization and weighing risks and having a Plan B and Plan C to pull off the shelf and tactically deploy, but it is important to continue to make investments in data analytics, AI and ML (machine learning) — we are going to see some really amazing leaps there,” said Purcell. “And while I do see a movement away from paper being a big thing, the umbrella going all over that is the investment in security to make sure everything is protected.”