How to optimise cash flow at scale

There is a clear distinction between Free Cash Flow – the cash that companies can generate after accounting for expenditures– and Enterprise Value (EV) – a company’s total valuation. While EV is an important metric for scaling and fundraising, cash flow is critical to the overall health and longevity of all enterprises. Poor cash flow has long been considered a bugbear unique to small and medium businesses, though it’s a frustrating challenge that also affects scale-ups and larger enterprises. 

In fact, our recent Forrester study of payment decision makers from firms with a company revenue of over $135 million revealed that 52% were experiencing late payments of over 30 days and 70% reported more than 10% of failed payments have turned into bad debt over the last 12 months. It’s easy to imagine how late payments and bad debt can lead even the most well-established enterprises down the route to poor cash flow, which is why it’s important to address the root cause of the issue before it becomes unmanageable.

Our own research has shown that payment timings don’t have to be slow. From over 40 million payments across 65,000 businesses, we identified that GoCardless customers using account-to-account payment methods see an average payment timing of just 3.6 days, having a positive impact on cash flow.

Download The Global Payment Timings Index 2021 

While it may seem like the task of optimising cash flow can siphon energy away from the things that matter most – building value for your customers and helping your business scale – a well-considered payments strategy is part-and-parcel of any organisation’s successful growth trajectory.

Automate for increased efficiency 

Automation plays a fundamental role for organisations seeking to add value by modernising their payments strategies. Intelligent innovations and approaches – such as digital payments solutions and subscription billing models – can provide businesses with a number of benefits, including lower payment processing costs, decreased manual processing, increased efficiency, improved churn and enhanced payment success rates. 

If suitable for your business, it may be worth considering a recurring payments approach to billing, which can pay dividends if you’re looking to optimise cash flow at scale. Collecting recurring payments through purpose-built, digital payment solutions will improve KPIs and relieve your accounts team of paper invoices and the headache of manual payment processing. It also has a positive flow-on effect on your customer relationships and experience, as you are no longer chasing them for overdue payments but instead enabling them to automate their invoice payment process.

Our study shows that organisations are recognising the value of recurring payment solutions, with nearly 60% of firms planning to invest in or expand/upgrade investment in recurring payment providers. Those who have not kept up with the accelerated pace of payment innovation will bear significant costs and will be left behind and unable to meet customers’ expectations.

Review credit policies and procedures 

While it’s important to tread the fine balance between nurturing customer relationships and protecting your cash flow, it’s also critical to review and amend your credit policies and procedures from time to time to ensure your business has the best chance to increase profit and maintain growth momentum. 

Businesses that offer payment terms often face the issue of late payments and effective credit policies and procedures can help to mitigate the problem. Consider implementing strict credit check and application requirements from customers requesting payment terms and highlight recurring bank debit as your preferred method of payment for invoices. Additionally, be sure to invoice quickly and follow up in a timely manner as soon as payments are past their due date. GoCardless’ seamless integration to popular billing solutions, like Zuora, Chargify and Salesforce, can help streamline these processes for your team.. Alternatively, you can customise how you use GoCardless with our developer-led, direct integrations. Either way, there is a good chance we can help seamlessly connect to your current billing process and take the manual processing out of your invoicing, billing and subscription management workflow.

Enhance your front-end 

The best way to encourage customers to pay on-time is to simplify the payment process by enhancing your front-end. Clunky payments platforms, error messages and time-consuming payments workflows are all major barriers to efficiency and customer participation and could affect your business cash flow. For those who have already implemented recurring billing, as part of their payments strategy, the front-end experience is already inherently optimised as customers are taken through the payments flow once and aren’t required to repeat the process once the recurring payment authority has been established. 

However, for those seeking to collect one-off or ad-hoc payments, it is important to consistently improve the front-end user experience in order to help encourage customers to pay on-time.

Ready to overhaul your payments strategy? Speak to one of GoCardless experts who can help you identify the best solutions relevant for your business – no matter what stage you’re in.