Improve Cash Flow By Decreasing Time To Cash

Founder and CEO of Gotransverse. A 25-year veteran of global enterprise software with a focus on monetization. getty In any business, cash is king, and no matter your revenue model, generating sales is meaningless if you can’t collect the money. While showing consistent growth is essential, maintaining shorter time to cash is […]

Founder and CEO of Gotransverse. A 25-year veteran of global enterprise software with a focus on monetization.

In any business, cash is king, and no matter your revenue model, generating sales is meaningless if you can’t collect the money. While showing consistent growth is essential, maintaining shorter time to cash is critical because cash keeps the lights on.

With more organizations adopting recurring revenue and pay-as-you-go billing, the time-to-cash problem is frequently more acute. Recurring revenue introduces monthly recurring revenue (MRR), a normalized measurement of recurring revenue, typically measured as a constant value in each month of the subscription period.

Even with MRR billing, it’s still important to focus on cash flow. MRR shows you the value of your subscriptions (i.e., your sales), while cash flow is the measure of money flowing in to support business operations. With MRR, your objective is to shorten time to cash and maintain a predictable cash flow so you can manage operational spending and plan for business growth.

Automating billing can help shorten time to cash in other ways as well. It provides the flexibility needed to adapt business processes and try new pricing and bundling strategies. Having reliable and easy-to-configure back-end billing processes creates the foundation to experiment, expand sales and shorten time to revenue.

The Road To Recurring Revenue

MRR is becoming the norm in many markets. According to a CFO Research survey, more than 53% of respondents said at least 40% of their revenue was from recurring subscriptions or usage-based billing. MRR increases customer lifetime value by billing a series of payments instead of one upfront fee. It allows for more customer interaction and engagement, which creates more opportunities to upsell and increase customer loyalty, and it provides a steady revenue stream.

No matter how you approach MRR, recurring billing necessitates more complex pricing models to accommodate measured usage rates, service bundles and other variables. More complex billing models typically require more manual processing, which delays invoice processing and reduces billing accuracy. Delayed invoices mean delayed payments and inaccurate invoices resulting in corrections, more delayed payments and an influx of customer complaints. All this impacts monthly forecasting and hinders accurate insight into your business. One way to effectively support recurring revenue is through automation.

According to Ventana Research, by 2025, 66% of finance and accounting departments will be able to close their quarterly books in six business days thanks to technology — that’s double the number of businesses that can do that today. Implementing an automated billing system shortens time to cash, especially as billing becomes more complicated.

Traditional billing solutions are not designed to easily accommodate new offerings, pricing or testing, which can cause delays in going to market with new offerings and finding the right pricing for existing offerings, delaying revenue and cash once again.

Trying to expand into new markets without billing automation can also delay revenue. For example, if your payment options are limited, you can’t accommodate transactions in markets where credit card and ACH use are less common. It also makes handling exchange rates, transaction fees and settlement more difficult.

Then, there can be delays with collections. Many well-established billing automation systems lack collections and dunning capabilities. That means manual support for collections and aging accounts receivables.

By applying quality renewal management practices using automation, businesses can reduce churn while improving cash flow. Automation optimizes renewals and upgrades as well as collections and dunning. For example, rather than having failed transactions go unpaid, payment retries keep accounts current and prevent involuntary churn. Many unpaid invoices are due to a simple error rather than an unwillingness to pay, so automated dunning makes it easier and faster to make accounts current without jeopardizing customer experience. Using automation, it’s also easier to differentiate between different types of customers, using risk scoring coupled with payment method type to guide dunning, payment retries and collections practices.

Automation Challenges

Of course, automating complex billing isn’t as simple as it sounds. It requires a clear vision of your business goals and objectives and an understanding of your agile monetization goals.

Too many organizations tackle automation projects as technology deployments. Maintaining an agile, automated billing system is a strategic business advantage, and it needs to be sponsored by senior business financial managers with backing from IT. To be successful, you need a senior-level sponsor from accounting or finance with a clear understanding of business goals such as:

Supporting recurring revenue streams.

Enabling new business models, new products and new markets.

Streamlining billing and accounting workflows.

Creating more visibility into billing and financials.

Shortening time to cash

Integrating billing systems with other business processes is an essential part of billing success. For example, product managers may be responsible for pricing goods and services based on different factors. Those factors may change over time, which means changes in pricing. Without integration, those changes have to be managed manually, which means more room for errors resulting in billing miscalculations.

One of the most common errors in any billing system is missing or erroneous data. Inaccurate or missing contact information can mean invoices are lost or never are delivered. There are recurring invoice mistakes, such as incorrect pricing, taxation or calculations, missing due dates and other errors.

Integration with ERP and CRM systems can help eliminate these errors, and general ledger integration is critical for tracking payments and revenue recognition. That’s part of the reason more organizations are standardizing on cloud-hosted financial and billing systems that can integrate with the other components of a native digital front and back office.

Cash flow is the lifeblood of your business, and one of the best ways to optimize cash flow is by automating the order-to-cash process. Not only does billing automation shorten time to invoices and collections, but it also guarantees the billing accuracy you need to run your business. Most importantly, it lays the foundation for business growth in an increasingly digital world.


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