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Is Payment Flexibility Hurting Your Business in Ways You Didn’t Know?
As businesses explore ways to increase revenue and drive growth, offering flexible payment options has become a popular strategy. However, many companies are realizing that this flexibility can come with significant hidden costs and unintended consequences. In fact, managing payment flexibility without integrated systems can lead to operational complexity, lack of visibility for deal prioritization, and pressure on margins.
Operational Complexity in Managing Flexible Payments
Managing flexible payments without integrated systems adds an unnecessary layer of complexity, particularly in billing and account oversight. Finance teams must manually monitor invoices, follow varied schedules, and chase late payments. Sales and customer success teams lack visibility into payment statuses, leaving them in the dark about upsells, cross-sells, or renewals. This fragmented approach increases costs and inefficiencies as teams work independently to manage accounts.
Lack of Visibility for Deal Prioritization
When sales teams lack a clear view of payment reliability or account status, they struggle to prioritize the right deals. Time and resources are wasted on high-risk leads while better opportunities slip through the cracks. This lack of focus can cost businesses in missed revenue and growth pressure.
Pressure on Margins
Managing payment flexibility in-house extends payment terms, increasing days sales outstanding (DSO) and tying up cash flow. Higher DSO reduces available cash, making reinvestment difficult. For smaller deals, delayed payments quickly erode profit margins, limiting resources for responding to market fluctuations.
These pitfalls set the stage for finding solutions that can help overcome them.
Overcoming Payment Flexibility Challenges
Whether exploring underwriting technology or considering business partnerships to minimize risks, every solution requires careful evaluation. AI-powered payment automation and B2B buy now, pay later (BNPL) partners offer attractive options but may come with hidden costs or dependencies.
Leveraging AI-Powered Payment Automation
AI can automate payment processes such as invoice generation, customized payment term creation, and reconciliation to help reduce operational strain. It can also predict late payments using historical data, allowing businesses to take proactive measures like sending reminders or making adjustments. Furthermore, AI flags suspicious payment activities or discrepancies, thereby reducing the risk of fraud.
However, AI automation does not provide upfront capital, which means liquidity gaps may remain unaddressed. Implementing AI solutions also requires technical expertise and resources, which can pose challenges for some businesses.
Partnering with B2B BNPL Providers
A B2B BNPL partner can help empower businesses to offer payment flexibility while providing them with upfront capital. Many BNPL providers leverage AI to minimize or eliminate risk. These partners manage the entire quote-to-cash process, including quoting, underwriting, billing, subscriptions, invoicing, and collections.
While partnering brings many benefits like higher revenue, upfront capital, zero risk, and reduced operational burden, partner fees can be high. Moreover, selecting the wrong partner can lead to cash flow issues or messy collections.
Effective Accounts Receivable Strategy
An effective accounts receivable (AR) strategy involves several key steps. It begins with classifying clients based on their payment behavior and financial health. Once classified, tailored payment terms can be assigned to each client, enabling the detection of at-risk accounts. For delinquent clients, stricter terms are enforced to help maintain financial stability.
This approach ensures a steady cash flow by minimizing overdue payments and reduces the risk of bad debt through proactive monitoring and segmentation. Additionally, it strengthens customer relationships by fostering clear communication and offering tailored payment plans.
However, without automation, managing AR processes can overwhelm teams as a business scales. Furthermore, offering flexible payment terms may delay revenue, which can strain cash flow during periods of high growth.
Ultimately, deciding whether to build or buy payment flexibility systems is critical.
Source: www.forbes.com
