Why automated invoicing could be the key to better cash flow

What is Cash Flow?  

Cash flow is simply the movement of cash in and out of a business. Businesses (including sole traders) need to do everything they can to optimise it. This generally involves a combination of managing spending and making sure that all customers and clients pay on time to ensure you have more money coming in than you do going out.

Some of the common challenges businesses face in managing cash flow are:

• Irregular income – A fluctuating income due to inconsistent work and projects results in unpredictable cash flow making it difficult to plan and budget both for personal as well as business expenses.
  

• Late Payments - smaller businesses and individuals in particular feel the pinch a lot more when clients delay payments, causing financial stress and strain.
  

• High Overheads – Businesses have expenses such as software subscriptions, office space or even just their personal rent or mortgage to cover. Having regular expenses with an irregular income source can create serious cash flow issues.
  

• Lack of Emergency Funds – this one’s specifically for the sole traders & freelancers out there (although businesses of any size should take note!) many businesses don’t have enough of a financial cushion to fall back on during quieter periods of work, increasing financial stress.
  

• Difficulty Forecasting Future Income – when taking on short term projects (instead of retainers or longer projects) it’s increasingly hard to predict future income and therefore plan for future investments or manage any outstanding dept effectively.
  

• Poor Invoicing Practices – Not sending invoices on time or without all the relevant information (or even just designed badly) can lead to payment delays, directly impacting cash flow.
  

• Lack of Financial ‘Know-How’ - In a large corporate company, someone else would be responsible for managing the businesses’ cash flow. The lack of knowledge can lead to poor financial decisions and eventually cash flow problems.
  

• Time-Consuming Financial Management – Creating and managing all invoices, keeping on top of payments and budgeting manually can be extremely time-consuming, taking time away from actual billable work and potentially impacting income.

If you’ve ever struggled with any of the above... automated invoicing could be a huge solution to a lot of these problems.

‍“Integrating automated payment solutions can help SMBs (small to medium-sized businesses) address critical pain points such as late payments and cash flow visibility, while helping maintain strong relationships with vendors and customers. Simplifying business-to-business (B2B) solutions through automation also can lead to more streamlined operations and better financial health”

- Soriano de Teresa
Senior Vice President,
Merchant Services at American Express

Why Cash Flow Management is so Important

Being in business means putting a lot of time and effort into staying in business. Staying in business is a challenge many small and medium-sized businesses, contractors and freelancers face, made even more challenging by delayed and manual payments.

Benefits of Automating Your Invoicing Process

• Saves time - Studies across the board have shown that manual invoicing can take up to 4x longer than using an automated invoicing software. The result? Lost time, lost money and lost productivity.

“Managing cash flow is one of the biggest issues that small businesses and new businesses face. FSB research estimates that 50,000 SMEs go out of business each year referencing cash flow as a cause. Across the UK [...] 56.4 million hours are wasted each year by businesses chasing late payments [...] Reducing the time businesses spend on chasing payments would significantly increase productivity and growth across the economy.”

- Department for Business & Trade,  
Payment and cash flow review report 2023

• Improves Accuracy & Reduces Errors – People are only human at the end of the day. Paper checks and manual payments are therefore always susceptible to human error resulting in further delays in payments, less access to cash flow and further issues with cash flow management.
  
  Automating these processes allows businesses to get a better insight into their financial status, ensuring timely payments and minimising the risk of human error that is all too common with manual payment methods. By having an increased visibility, businesses can manage their cash flow much more successfully and reap the rewards that come with better cash flow management.

• Consistent & Professional – by automating your invoicing process, you can be guaranteed that every invoice will be sent on time. This shows to your customer/client that you’re a professional and should be treated as such, which in turn will help maintain a positive relationship between yourself and your customer/client.  

Improving Cash Flow with Automated Invoicing

• Faster Payment Cycles
  The sooner you send your invoices, the sooner you’re likely to get paid. If you can automate this process to ensure every invoice is automatically sent exactly when it needs to be, then businesses will experience a much faster payment cycle and much better cash flow management.
  

“The benefits of automation are tangible. Businesses that adopted automated solutions during the pandemic have reported improvements in cash flow management or receiving faster payments, according to Amex research. This return on investment (ROI) underscores the value of embracing digital payment solutions.”

- Soriano de Teresa
Senior Vice President,
Merchant Services at American Express

• Automated Incentivisation through Early Discounts & Late Fees - The time and awkwardness spent wording an email explaining why you’ve had to implement a late fee to a client (not to mention the time spent calculating what the fee is) can be huge. Automating this whole process takes all of this admin out of the picture. We'd recommend checking out our Automated Reminder tools which let you set reminders that escalate from friendly ‘nudges’ to more urgent requests, all whilst maintaing a professional tone and acting as a kind of ‘third party’ in the relationship with your customer/client (thank us later).
  

• Better Cash Flow Forecasting – a good invoicing platform should be marking any changes to your invoices automatically, allowing you to see changes and track your cash-flow in real time. Allowing you to better forecast your cash flow.

How Payment Bear Can Help with Automated Invoicing

Payment Bear’s automation tools can help with all of the cash flow problems mentioned earlier. There are three different automation solutions for users to choose from:  

Automated Reminders

Schedule automated reminders to your customer for unpaid invoices and allow us to automatically send any ‘awkward’ late fee increases for those pesky late paying clients.

Recurring Invoices

Schedule invoices that repeat on a set frequency, saving you precious time whilst improving your payment cycle.

Statuses & Tags

We automatically mark any changes to your invoices and immediately update the status of each invoice, providing you with real-time monitoring and reporting of your cash flow.

“I have been a freelancer for a year and this is my first time using an invoicing platform. Payment Bear has helped me become so much more organised, being able to keep track of my invoices and payments all in one place."

Takeaway

From saving time to removing human errors, speeding up the payment cycle and improving cash flow forecasting, it’s clear that automating the invoicing process is a no-brainer to unlock better cash flow. Whether you’re a small business owner or freelancer,  

Payment Bear’s easy-to-use automated features provides you with all the tools you need to start automating your invoicing effectively.

Click here for our step-by-step guide on how to get set up and start automating your invoicing!