The slow bleed draining your cash flow

While issues like late payments and fraud may be the most recognizable examples of lost revenue, an even more common culprit is revenue leakage throughout the collect and pay process.

The simplest example appears in the cost of working with manual or paper invoices. As a general rule, the cost is considered equivalent to the cost of 30 minutes of labor from an employee. Using this measurement, the amount typically ranges between $12 and $35.

Though the exact cost may vary, it’s safe to assume a of $5 per invoice when the same documents are processed digitally. In a scenario where you are spending $12 to process an incoming or outgoing invoice, you’d be paying 140% more per invoice. Move that scenario to $35 per invoice, and you’d find yourself paying 600% more. That’s not just a slow bleed. It’s a hemorrhage.

When looking at issues like delayed payments, whether incoming our outgoing, there’s also a tendency to only consider the immediate impact, but the risk is more substantial. Slow cash application or errors sending out a bill can lead to customer frustration, which in turn can lead to churn. With more and more companies entering the finance automation space, customers have more choices than ever, and frequent errors and delays are rarely tolerated for long.

Similarly, frequent late payments to vendors pose a threat to your supply chain. Vendors may offer less favorable and more restrictive terms due to frequent late payments. They may even choose to stop working with you altogether, deeming you more risk than reward.

It’s time to give your finances a check-up

Most people don’t set out to be unhealthy. And more often than not, your finance team doesn’t set out to engage in risky or harmful habits that lead to revenue leakage, bad debt, or fraud.

Instead, little practices that may seem innocuous slowly grow cause long-term damage to your financial health. No finance team is perfect, no matter how diligent they might be. Mistakes and bad habits creep in. That’s why you need to run check-ups on the health of your collect-and-pay process. Chances are, you’ll find areas that need improvement, and once you’ve identified them, you can start taking practical steps to ensure your organization’s long-term financial health.