Bridging the Invoice to Cash Flow Gap: The Path to Financial Health
The cash flow gap, which is calculated by measuring the difference between invoiced amounts and actual cash flow, can significantly affect a business’ operational capabilities, growth investments and financial stability. Calculate your cash flow gap and then see the impact an automated accounts receivable platform can have on improving your financial health.
Accounts Receivable
How many customers do you have?
What's your average monthly recurring revenue per customer?
$
What's your outstanding accounts receivable balance?
$
Your monthly recurring revenue is {{currencyUSD(Math.round(this.customers * this.amrrpc))}} and your outstanding accounts receivable balance is {{ currencyUSD(this.oarb) }} The ratio of outstanding A/R to revenue is {{this.month()}}X which means you are approximately {{ this.month() }} months behind in receiving payments.
This delay in payment collection can severely impact your business liquidity, making it difficult to cover operational costs, invest in new opportunities or respond to financial emergencies.
What are your standard payment terms with clients?
On average, how many days after invoice is sent do your customers pay you?
On average, how many customers pay late?
You were expecting {{currencyUSD((this.customers * this.amrrpc))}} in revenue every month, but you are only getting {{currencyUSD((this.customers - this.customers_late ) * this.amrrpc) }} in your bank.
Because of the discrepancy between expected revenue and actual cash flow, you typically incur {{currencyUSD((this.customers * this.amrrpc) - ((this.customers - this.customers_late ) * this.amrrpc) )}} in carrying costs.
The discrepancy between expected revenue and actual cash flow poses three primary challenges:
- The effort to chase late payments imposes an administrative burden on your team, consuming valuable time and resources.
- A shortfall in cash flow compromises your ability to cover essential day-to-day operational expenses, such as payroll and inventory, potentially forcing you to borrow at a cost or face late payment fees.
- This curtails your capacity to invest in growth opportunities, hindering your business's expansion efforts.
In addition, your days sales outsatnding is {{ this.customers_late_inv }} yet your standard payment terms with clients is {{ this.payment_terms }}. The difference is {{ this.customers_late_inv - this.payment_terms }}days.
The gap between payment terms and actual payment dates signals a troubling trend of customers consistently missing invoice settlement deadlines. This delay in receiving funds poses a significant risk to your company's financial stability, essentially turning your business into a de facto lender. This extended period without incoming cash can strain your ability to meet essential financial commitments.
Bridge your Invoice to Cash Gap With 5 Simple Steps
1
Set clear payment terms right at the outset
Ensure that both you and your clients have a mutual understanding of payment expectations, timelines and methods (credit card or ACH).
2
Automate payments
Automate your variable contract payments effortlessly, and ensure seamless reconciliation in your accounting platform.
3
Sync your PSA and accounting platform automatically
Ensure every payment matches its invoice in your accounting platform for hassle-free bookkeeping.
4
Send automated payment reminders
Don’t let late payments pile up. Set up automated reminders and dunning notices to keep cash flowing without the manual follow-up.
5
Offer multiple payment options
Make it easy for your customers to pay through a branded portal, directly from PSA invoices or via autopay for recurring contracts. Plus, enable payments from every reminder and notice email for maximum convenience.
Why they would recommend ConnectBooster
Chris Amori, Partner
Newtwork Depot
“We have used ConnectBooster for over 2 years now, and they have been an invaluable asset to our company. Before ConnectBooster, our accounting staff literally spent several DAYS per month, manually billing credit cards in QuickBooks, dealing with getting and updating cards, re-processing failed payments, and more. ConnectBooster has allowed us to fully automate that process and never have to touch a user’s credit card. (PCI Compliance… Done!)
Chris Amori, Partner
Newtwork Depot
“Once an invoice goes out, I no longer have to send reminders to clients or ask our staff to follow up on payments. We realized that we had a problem with people not paying, but we didn’t know how easy it would be to fix until we got ConnectBooster.”
Chris Amori, Partner
Newtwork Depot
“The automated collections process fixed our problem. We enjoy having more cash in our checking account every month, not additional accounts receivable. That lets us automate more processes, hire more (and more qualified) employees, and continue building out our managed services practice.”