payment cycle

4 min

Why small businesses need a holistic view of the payment cycle

As we have said before, cash flow is your company’s lifeblood. Balancing your incomings and outgoings can sometimes be a tightrope walk, but there’s a way to make a safety net. You can ride out challenges that restrict your access to cash by taking a holistic view of your payment cycle.

Jasmine Xie

Jasmine XIE • Libeo

Published on | Updated on

At Libeo, we are all about celebrating your success. And success often means navigating safely through those unexpected periods of low sales, seasonal downturns or other trials. A holistic view of the payment cycle allows you to anticipate potential bottlenecks and gaps – to look ahead and take proactive steps to deal with problems before they arise.

Payment cycle challenges In today’s market

Small Business Commissioner Liz Barclay identifies why a holistic view of the payment cycle is vital in today’s market.

“We need a real culture change around business payments in the UK to take pressure off our phenomenal entrepreneurs. People who have already delivered goods and services have to be able to turn their attention to their next client and next order, rather than chasing up late payments and worrying about their cash flow.”

Unless your invoicing is fully automated, the cost is another crucial reason to take a holistic view of the payment cycle. 

In the UK, each invoice costs a business an average of £12 to process. Some companies incur expenses as high as £50. This cost is a factor of the number of invoices processed each month and the expense of employing someone to carry out the work. 

For many businesses, reviewing, approving and reconciling invoices is a constant drain on resources. Annually, companies spend 56.4 million hours chasing overdue and late payments. Small businesses lose, on average, a week each year just chasing down unpaid invoices, equating to approximately £6.3 billion in charge-out rates and other costs. 

Given the high stakes UK businesses face when dealing with problems caused by late payments, it pays entrepreneurs to act now rather than waiting for the government or regulators to act. Forward-thinking firms can take control of their payment cycle by adopting automated, digitised solutions.



Taking the pain out of payments

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Make better decisions with a wealth of actionable data

Jonathan Munnery, a partner at Begbies Traynor, points out, “Computerised accounts that are accurate and up to date are vital to staying in control of cash flow.”

Cloud-based, automated solutions give you instant access to documents and data whenever you need them, rather than having to flick through filing cabinets or old ledgers. Live bank feeds give years of transaction history through a simple integration, automating many bookkeeping processes and improving transparency and real-time reporting. 

For small businesses, shifting to cloud infrastructure brings many rewards. Data is consolidated in a stable environment that can be scaled up quickly. You can say goodbye to the chore of fixing dual inputs, obsolete details, and human errors.

The wealth of information allows you to adapt your business strategy nimbly, guided by facts rather than gut instinct.

Gaps in the payment cycle

The allure of saving time draws many firms towards fully automating their payment cycle. AI and machine learning tools can take on data-intensive operations and free entrepreneurs up to carry out more important tasks.

Advanced machine learning tools will help your business grasp its payment cycle. By detecting problems before they build up, modern platforms offer multiple ways for customers to pay you, which increases your chances of getting paid on time. Some systems will move money around, pay suppliers and collect cash from your bank account. Automated software can also use your company’s bank account details to take control of direct debits.

The only trouble is, in these automated systems, there are a few inexplicable gaps.

“If you’ve already digitised everything you know how to digitise, you’ll know that paying invoices still takes ages,” says Pierre Dutaret, the CEO Of Libeo. “Not only that, it’s possible to duplicate payments, lose an invoice, and you can still struggle to get your cash flow in line. What gives?”

Dutaret cautions that without a holistic approach that digitises all aspects of the payment cycle, things can be laborious even with accounting software. 

“Although all the digital threads are meant to weave together—reconciliation functions, approval workflows solutions, even bulk payment systems—they could be tying you in knots,” he says. “You’re still going to be manually entering and validating your invoices, you’re going to be chasing approvals from budget holders, and you’re going to lose 10 hours a week for the privilege.

A holistic approach to payments – including invoicing

Without complete, holistic invoice automation, businesses still chase people for approval. “Your unautomated system might have carried you this far,” Dutaret says. “But as you grow, you’re risking admin problems, invoices left behind or unmarked, and the seams in your loss-prevention system are tearing open.”

Good invoice management and payment processing platforms will give you complete control and make the process more efficient. Moreover, it will save you the most critical thing in business – time.

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To help you get a more holistic view of your payment cycle, how about doing a cash flow forecast—find out all you need to know here!

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