A Q&A provided to PaymentsJournal from Craig Walker, Executive GM Product at Xero:
1. The technology sector is looked to improve long standing inefficiencies, wherever they may be found. How do you feel the sector does when it comes to its own accounts receivable processes and practices?
The success of any business is underpinned by its ability to get paid. In fact, the majority of business failures can be attributed to poor cash flow. We believe more should be done to ensure governments and large organisations pay their suppliers—many of which are small businesses—on time. To support this, we aim to pay small business suppliers’ invoices globally within 10 business days.
As notorious late payers, large organisations have often struggled to automate their accounts payable process as quickly as small businesses, due to the sheer number of vendors they use. However, innovations like e-invoicing and other automated systems that address this issue are quickly gaining traction around the world.
It’s these technologies that are simplifying and streamlining what has traditionally been a very complicated and time-consuming process. As more businesses digitise their operations, I think we’ll start seeing even more efficiencies in the invoicing and payments space — which will ultimately benefit businesses of all sizes and their suppliers.
2. If there are challenges and/or inefficiencies, what are the main ones?
Invoicing and payment processes have traditionally been quite inefficient. There used to be a lot of manual work involved, from invoicing customers to tracking payments and following up on overdue invoices (sometimes multiple times).
These problems are now being addressed with new technologies. For example, businesses can choose to ‘set and forget’ payments with ACH direct debit or other online payment options. We’ve found that customers who include an online payment option on their invoice get paid up to twice as fast than those who don’t.
Other simple features like automatic invoice reminders, or blocking an invoice from sending if it exceeds the customer’s set credit limit, are also solving these inefficiencies. It means businesses spend less time doing their accounting work, and can focus more on making their business a success.
3. Are there particular challenges when it comes to working with cross-border customers?
Despite the pandemic making travel more difficult, global trade is still increasing. Managing cross-border payments is crucial for companies with an increasingly global client base. Implementing the right technology is key—particularly solutions that make multi-currency payments seamless.
Businesses no longer need to be limited by borders when it comes to invoicing and payments. In fact, the right technology may even allow businesses to extend their operations globally while reducing their operational costs.
4. What role has the pandemic played in your market? Has it exacerbated or improved some of the back-office challenges alluded to above?
Cash flow and payments are critical for businesses. Small businesses in Australia, New Zealand, and the UK were hit twice as hard by COVID-19 as big businesses.
At peak impact, small business revenues fell by between 10% to 40%. However, the more tech enabled businesses experienced 40% less job losses. We know that technology has been critical to help businesses work remotely and access their data in real-time, helping them make smart business decisions. In this environment, it’s essential that businesses have a deep understanding of their cash flow.
5. What sort of solutions do you view as the most promising for improving accounts receivable processes in the B2B tech space?
There are new innovations in the market that can help improve payments times and have the potential to really make a difference to small business success.
Here are a few that we’d recommend learning more about:
- Automated payments – With late payments still a major issue for small businesses around the globe, automating payments can be a game changer and help improve cash flow. Automated systems that allow faster and simpler processes are gaining ground and amplifying competition. There are a variety of great solutions that integrate with your accounting software such as Stripe or GoCardless.
- Online invoicing – The transition to digital invoicing will enable firms to generate invoices quickly and efficiently while also providing recipients with easy payment options. This will also allow businesses to track open invoices and payments and automate reminder notices.
- E-invoicing: E-invoicing is a way to seamlessly and electronically exchange invoices between software systems. This means that unlike emailing a PDF or a link to an online invoice, e-invoices are sent securely from one software system to another, ready to be approved and paid. Recipients no longer need to manually enter invoice details. This has the potential to save significant time and contribute to faster payment and healthier cash flow. It’s still gaining momentum around the world but is getting significant government support in Europe, Singapore, Australia and New Zealand.