Technology is not a silver bullet when it comes to getting paid on time

Late invoice payments have significant ripple effects on small businesses, as a recent survey of 1,000 Australian small businesses shows.

The survey is conducted by Xero, an accounting software provider. It highlights that 63% of small businesses dealt with late-paying clients, and this resulted in 24% of participants delaying payments to themselves, while 23% were not able to pay their SME suppliers on time.

Additionally, 45% of them find that the entire invoicing process is stressful, as they spend about 12.4 hours (or two business days) every month on invoice management alone. About 30% of participants devote more than five hours to creating invoices, while 22% spend the same amount of time chasing late payments, and 19% spend the same time on correcting errors in invoices.

With so much stress involved, it is not surprising that 78% of respondents felt they might benefit from adopting e-invoicing, as they felt this may save time and provide greater accuracy.

Indeed, many sellers of accounting software technology claim that their solutions can “solve your cash flow problems”. Some governments also support this mistaken view. Perhaps this is because they, too, misunderstand the causes of late payment, or because digital platforms render business transactions and relationships conveniently visible to governments and regulators and aid tax collection.

While RIABU appreciates technologies that help companies operate more efficiently and that support growth, we believe that when you get paid late, it is because a human being (or human beings) has made a decision to pay you late.

A machine does what it is programmed to do. No amount of technology is going to change this, and the solution always lies in increased intimacy between people.

In fact, even the CEO of a leading technology company mentioned in our book – Let the Cash Flow – said that although technology can provide criti­cal data to manage a business and help accelerate processes and improve communication, it cannot get you paid quicker because human beings make decisions on who to pay and when. Using an accounting software platform is unlikely to solve this problem.

Technology can certainly simplify some aspects of what we advocate in our book about cash flow management. But if you rely on technology alone to get your cash flow moving faster, you are heading for disappointment.

That’s because getting paid on time is not really a technology question. It is more about human trust. You have to build your trust all the way through your supply chain. The more you can do that, the better.

It’s about how you build the relationship with your new or existing customer, and about how you then manage that relationship.

Very often, SMEs focus on sales and product delivery, and only then do they turn their attention to invoicing.  In fact, businesses should be thinking about invoicing and payment arrangements at the very beginning, when they are engaging in discussions with prospective or current clients. Doing so removes any ambiguity about what's expected when it comes to payment processes and expectations. If businesses don't articulate these expectations early, customers won’t bother paying you on time, simply because businesses haven’t asked for it.

So, it's down to you to ask the right questions at the right time. Refer to our checklist of cash flow management mentioned in Let the Cash Flow. Go through that list. You'll be one of the ones to be first in line to get paid.