“Cash flow is the lifeblood of any business” – we’ve all heard the phrase, so much so that it’s become common wisdom bordering on a cliché. It’s easy to see why when you break it down to the most basic business principle. No matter how good your business, if you run out of money, the game is over.
Add to this that virtually all business decisions result in a transfer of value, usually represented by the need to collect or disburse cash, and you can see why cash flow is so closely tied to health and well-being. be of any business.
Whether you’re selling the latest smartphone, buying stock from a vendor, acquiring a new office building, or financing a subsidiary in a foreign market, every transaction must settle. Yet markets are complex, global and competitive. There is a vast ecosystem of providers and a myriad of payment solutions and financial services that address these simplest problems: how to move money from A to B efficiently and risk-free.
Reduce risk 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. Businesses must find a way to overcome complexity to take advantage of the tremendous opportunities and offer their customers and suppliers more meaningful and simpler ways to do business. What works for a small company operating locally in one state is unlikely to work 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 their operation, which allows them to grow and adapt quickly to changing market and business conditions.
Much has been written on the collection side in a booming 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 players. 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, thereby maximizing cash flow, reducing risk, and delivering exceptional third-party experiences.
Increase consumer loyalty
The pandemic and accompanying financial challenges have prompted companies to rethink their strategic payment capabilities and implement long-term solutions to strengthen their balance sheets and promote efficiency. According PYMNTS Report (opens in a new tab)71% of CFOs said they have increased their use of digital payments since 2020.
Digital payments by credit card have become particularly popular, followed by digital payments made by direct deposit and alternatives such as PayPal. The importance of digitizing payments is spread across all industries.
Yet finance and insurance face particular pressure to optimize their payment systems to improve their processes, customer experience and cash flow.
Interestingly, these 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 of businesses and their eagerness to improve their payment systems, the complexity of the ecosystem makes the digitization of payments a difficult journey. With hundreds of different payment methods, thousands of payment processors, and new technologies emerging daily, payments are far from simple.
More payment options means more paying customers
Navigating this subject requires expert-level payment knowledge and experience, which most companies don’t have the ability or inclination to develop in-house. The complexity of technologies, business processes, efficiency and risks inevitably come to the fore when designing an optimal cash management system. These challenges, however, often end up stifling innovation and delaying the speed at which initiatives can be rolled out.
Creating exceptional business performance requires focusing on the collection (accounts receivable) and payment (accounts payable) capabilities that every business is exposed to.
Maximizing payment terms to suppliers while minimizing collection time is no longer the only consideration for a company. Offering a wider variety of payment methods, automation and integrated financial products have the potential to increase the potential size of the target market and generate a host of benefits, including reduced risk, improved sales conversion, improved margins, happier customers, and a healthier, happier deal. Chains.
For customers, offering a wide variety of payment methods that best suit their individual needs greatly improves the likelihood of a sale. Not only does this benefit the bottom line, but it also increases customer satisfaction and retention rates.
Likewise, offering flexibility on AR solutions increases the likelihood that a payment will be collected, minimizes bad debts and improves the cash cycle.
It’s not just about a smooth checkout journey anymore; businesses need to meet their customers’ payment needs and offer them the methods they want in a way that works for them. Ultimately, with the overwhelming competition and high standards set by innovative industries like e-commerce, customers are looking for companies that can deliver the whole package.
The lack of payment choices may be enough to have them seek services elsewhere. Customer experience is holistic and involves a range of critical factors. Businesses need to differentiate their offering with flexible collection, refund, payout, and reward offerings. These are proven to increase customer satisfaction, conversion rates and loyalty.
Understand what payment options to offer
Integrated financial services are another great opportunity for companies to leverage their specific customer and supplier knowledge base to launch their own financial services offerings. It could make the customer journey more accessible, faster and more convenient – precisely what customers expect from any service or product they purchase.
In addition to providing a better overall customer experience, integrated finance has a range of benefits for businesses, such as increased cross-selling opportunities, maximizing revenue and increasing margins while using data to reduce risk. Although a relatively new concept, embedded finance is already valued at $22.5 billion in the United States and is expected to grow nine times that much by 2025, according to a Statistical report (opens in a new tab).
Automation is another essential part of digitizing payments. Businesses should seek out technology partners to automate and simplify manual payment-related business tasks and 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 saves businesses money 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 essential for better overall cash flow management and vastly improved analytical capabilities.