The Cash Flow Effect Of On-The-Spot Invoicing

The struggle that small suppliers endure to get paid is well documented, but this pain point can be particularly severe for some small service providers. That’s because these companies are often working onsite and in the field, therefore having to issue invoices and accept payment on-the-spot, too.

A survey by San Francisco-based technology company Fundbox released in March found nearly two-thirds of small businesses are affected by late invoice payments, with 79 percent reporting they can’t pay themselves because of it. Business owners also expressed an inability to build inventory, invest in advertising or pay for wage increases or bonuses for their employees. Fundbox researchers estimated that small businesses in the U.S. are sitting on $825 billion in unpaid invoices, with the average small- to medium-sized business (SMB) owed $84,000.

As challenging as this scenario is for a small business, these payment delays will only lengthen if a service provider is unable to issue an invoice at the time of service. Separate research from Intuit, the business and financial software company, found nearly one-fifth of small business owners have admitted they forget to send an invoice or to follow up on invoice delinquencies — with a significant portion unable to accept cards on those invoices.

According to Tedd Huff, vice president of product at payment processing company GlobalOnePay, that inability to accept some type of electronic payment when issuing an invoice can add another layer of friction to service providers’ cash flow.

“While they’d still be able to accept electronic payments, it’s a lot more cumbersome,” Huff recently told PYMNTS. “They have to have somebody mail in the information, or call in the card number [or] enter it into a separate system.”

GlobalOnePay recently partnered with InvoiceASAP, a mobile and web eInvoicing solution for SMBs which was designed with small service providers in mind. Their pairing enables business users of InvoiceASAP to issue an eInvoice on the spot and accept card payments from consumers and business customers alike.

“Realistically, what this does is converges all of these steps and creates a simple process where you send the invoice, you have the customer sign off on it and then you send them the ability to make a payment immediately,” Huff said. “It gets the business to the point of revenue much more quickly and reduces delinquency on invoices.”

Also key to facilitating this cash flow, the executive said, is for businesses to be able to facilitate both card present and card-not-present payment acceptance scenarios.

“That’s a big one,” Huff said. “It bridges that gap, especially for home delivery or home services businesses, to handle what’s happening on both planes, whether it’s real-time, right now, in front of you, or whether the invoice is being sent out later.”

Research also shows that small businesses are beginning to understand the benefits of online payment and mobile pay capabilities in invoicing and cash management. A survey from small business accounting company Bill.com, for example, found 44 percent of small businesses agree the ability to process a mobile transaction or online payment is now a requirement. Trust in mobile pay tools is strong, too, with 83 percent reporting they believe these mobile capabilities to be secure.

Further, 43 percent said they consider the ability to monitor cash flow via mobile device as an important part of their businesses.

Flexibility in how businesses send out invoices — whether immediately or after the fact — coupled with flexibility in how they accept payment are critical to ensuring proper cash flow, decreasing invoice delinquencies, boosting invoice payment rates and supporting the overall financial health of a small business.

According to Huff, integrating these two capabilities via the GlobalOnePay-InvoiceASAP collaboration aims to help small businesses, especially service providers and suppliers, achieve these goals. But it has benefits for the customer relationship, too, he said.

“It speeds up the entire process and really creates a more stable process for the service industry professional,” Huff says. “It captures data, it helps the business get paid and, for the customers, it gives them the assurance that this isn’t just a ‘fly-by-night’ scenario.”