Paystand Blog

Read about the digital transformation of commercial payments and how to automate your enterprise cash cycle.

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A Guide to Faster Payments and Better Cash Flow

Mar 19, 2024 by Zazil Martinez

For accounts receivables (AR) teams in every organization, how to get paid faster is a priority for a faster cash flow cycle. Following up on overdue invoices and updating accounts is essential no matter what your company sells. However, chasing late payments can be frustrating. Planning before a payment is late is crucial, especially for customers who frequently fall behind. Thankfully, there are some simple ways to get invoices paid faster. We compiled a list of tips that have helped our customers so you can do the same. Understanding the Psychology of Payment Acceleration Understanding the psychology behind payment behavior is essential on how to get paid faster. Human behavior significantly affects how clients prioritize and manage their payments. One key psychological concept that influences payment behavior is loss aversion. Loss aversion refers to the tendency for individuals to strongly prefer avoiding losses over acquiring equivalent gains. In the context of payments, clients may prioritize settling invoices promptly if they perceive late payment as a loss. By framing early payment as an opportunity to avoid a loss, businesses can motivate clients to prioritize timely payments. Businesses can leverage loss aversion by emphasizing the negative consequences of delayed payments and highlighting the benefits of early payment. Communicating the potential risks of late payment, such as late fees or damaged relationships, can prompt clients to take action to avoid these losses. Conversely, presenting early payment incentives as opportunities to prevent these losses can encourage clients to pay promptly. Understanding the principles of loss aversion and other psychological factors enables businesses to tailor their payment strategies to align with clients' behavioral tendencies. Strategies that appeal to clients' desire to avoid losses while presenting opportunities for gains can effectively accelerate payment timelines. Incorporating psychological insights into payment practices enables businesses to cultivate stronger client relationships and enhance cash flow management. Actionable Strategies for Getting Paid Faster 1. Chose Electronic Invoices Sending invoices through traditional mail doesn't speed up payment; it takes longer, risks loss, and adds costs to collections. Invoicing your customers electronically can quickly solve all these challenges. By using electronic invoices, you can reduce processing costs by 81% and get paid 77% faster. 2. Automate Customer Collection Plans Financial teams often send reminders to customers to encourage payment of unpaid invoices. Our power users approach late payments very differently. Instead of waiting for accounts to become overdue, they proactively put all their customers on automated collection plans. These plans clearly outline the steps to take when there is a slight indication that a customer may pay late. When do you send the invoice? When does a reminder get sent? How often should you follow up by email or phone? Automated collection plans are great because they ensure you won't have to review an account and wonder what to do next. 3. Digitize Your Receivables ASAP Digital AR software is vital for faster payment times. You can use it to create and change receivables and easily record essential data. Your team can track it and see related payments or messages in one place. A better view helps you find problems that may make your invoices unnoticed, unprocessed, or unpaid. 4. Set Up Early Payment Incentives A common way to get paid faster is to offer customers discounts for paying early. This works exceptionally well if you use net-30 terms. Customers usually receive a 2-5% discount for paying invoices immediately. However, a 5% discount may not be ideal for collecting larger sums of money. Fortunately, there are other ways to encourage early payments. You may need to think outside the box. Customers who sign up for auto-pay or recurring billing receive special advantages and save money. Get your sales team's help by offering bonuses or delaying commission until payment. This makes your sales team a collections partner, not an adversary. You can incentivize customers to reduce their DSO by extending payment terms. Reward your collections staff with individual bonuses for improving their assigned accounts. If the entire team achieves its goals, increase the incentive. 5. Maintain Customer Communication Regularly contacting customers is an underrated shortcut on how to get paid faster. After helping more than 120,000 businesses make payments, we have found that customers often forget about invoices they have not paid. A simple gesture can be the gentle nudge people need to get a payment on its way. To ensure your invoices aren't ignored, meet your customer's expectations, even if they're not stated in the agreement. When you communicate regularly with your customers, they become more interested in paying you on time. Best of all, you can automate these communications using cloud solutions like Paystand. 6. Send Pre-Invoice Reminders To get paid faster, send customers a friendly reminder email before sending them an invoice. This gives them time to prepare their payments if they’re prone to forgetfulness or fall behind schedule. Ideally, you want to send this about a week before you send them an invoice. To be polite, it's better to warn them instead of asking about the unpaid bill. To make it easier, ask if they're satisfied with the product/service and if payment is on track. 7. Use Alerts to Automate Collections Alerts are helpful tools that can simplify your AR processes and save time by automating repetitive tasks. Create "if/then" scenarios for tasks such as following up on late payments or transferring funds between accounts. This will help you save time and focus on more important tasks instead of moving work through your pipeline. Handoffs. Manually approving one task and starting the next can add delays and bottlenecks to the AR process. How many hours could you save monthly if a form field automatically triggers the handoff? Status Updates. Once payment has been received, there's no reason you should have to update the invoice status in your ERP system. How much time would you save if your system automatically updated and communicated completed tasks? How much faster could your monthly close happen? Reminders. If you're a business with a handful of high-paying customers, sending communications or updates is extremely fast. However, automating reminders for approaching or past due dates can save much time for most businesses. Here is just a sample list of tasks you can quickly automate: Preparing and sending invoices Adding payment links to invoices and emails Writing and sending pre-invoice reminders Accepting payments from customers Tracking payment settlement Verifying customers have made a payment Sending late payment reminders Setting routinely late customers on collection plans Reconciling payments Sending payment receipts Running financial reports It's crucial that your software sends the invoice and accepts payment from your client automatically. This lets you and your customer focus on work instead of sending and paying invoices. Investing in Invoicing Pays Off Collections are vital to your larger AR management strategy. Instead of approaching invoicing as a task, imagine it as the entry point into faster payment and healthier cash flow. Overall, investing in AR automation software will improve your ROI. Stop chasing late payments and hearing the most common excuses for them, and concentrate on growing your business by improving each payment process step. To implement some of these learnings, read our free eBook, The Controller's Guide to B2B Payment Optimization. If you found this article helpful, this short read will help you accelerate collections and save 30+ hours per month. Book a free demo with one of our experts today to reduce overhead costs, eliminate transaction fees, and streamline collections.

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The SVB Collapse & Secure Treasury Management: Tools to Manage Cash Securely

Mar 17, 2023 by Brandon Jones

Secure treasury management is top of mind now more than ever. In light of the recent collapse of SVB, we at Paystand are redoubling our efforts to provide CFOs with the tools they need to efficiently manage, monitor, and confidently access their cash resources. What Happened to Silicon Valley Bank? Silicon Valley Bank (SVB) collapsed, and financial regulators seized its assets on March 10, 2023. SVB’s collapse marks the second-largest US bank failure behind the 2008 failure of Washington Mutual. How Did SVB Fail? SVB’s stock collapsed when they experienced a bank run on March 8th and 9th. Several factors triggered the run, including SVB disclosing a $1.8 billion loss and a downgrade from Moody’s risk management agency. By March 10th, SVB account holders found their cash locked up and out of reach. How is the SVB Collapse Affecting the Economy? Depositors will eventually get access to all the money they deposited in SVB. Still, the collapse is causing significant and troubling effects throughout the financial sector in addition to short-term pain for depositors. SVB's collapse reveals an inherent risk within the US central banking system. Banks represent a single point of failure risk, and customers ultimately lack control over their deposits. If a bank becomes insolvent, its customer deposits become insolvent as well. Not all companies are safeguarded with fund reserves and healthy cash flow to maintain financial operations in an emergency. At this point, the biggest objective for CFOs - even if there is no SVB link - is to put the company's money in an appropriate portfolio, as opposed to a single institution. Diversification is key to maintaining fast cash flow, payment control, and business growth. The SVB situation showed that cash flow problems can cascade through a company's operations and impact its ability to pay suppliers, meet payroll, and invest in growth opportunities. Therefore, CFOs must be vigilant in monitoring and managing their company's cash flow to ensure they can withstand potential disruptions in the market. How do We Avoid Crises Like the SVB Collapse in the Future? Decentralization. Businesses still need ways to safeguard their cash flow and treasury while maintaining their ability to pay employees and vendors, receive payments, and grow their operations. Decentralized finance employs open-source technology to diminish banks' and financial institutions' influence on transactions. Without intermediaries slowing down the process, you can receive and reconcile payments in minutes instead of days. Decentralized payments lower processing fees and give complete control to merchants and buyers. This leads to significantly faster transactions, eliminating the need for days-long settlements. This technology has many benefits, including increased security, faster settlements, clear records, and scalability. It provides an extra security layer as data is spread across different servers through the blockchain network, making it hard to hack. Transactions settle in hours or minutes—which frees up cash flow bottlenecks—and are automatically logged and preserved in a "block," which makes managing a clear audit trail easier. An essential advantage of decentralization is its scalability. Payment platforms can expand and grow alongside businesses without penalties, with transactions executed without third-party involvement. Now growth happens without worrying about constraints in the financial processes. By decentralizing, businesses can distribute their risk so that no one disaster can wipe out their cash reserves and their ability to do business. “The SVB situation exposes a risk in banking that few paid attention to. Usually, the discussion among CFOs is how to increase revenue, cut costs, and drive profit margins, not, ‘will the funds in our business checking account be available for us to use tomorrow?’ Paystand, with its decentralized payment network operating on the Blockchain, gives CFOs multiple approaches to collecting, accessing, and managing their funds no matter what." -Jeremy Almond, Paystand CEO and Founder Paystand’s Decentralized Finance Solutions The recent events in the financial sphere have brought attention to a situation we may not have considered. This moment allows us to think ahead, plan, prevent, and take the necessary actions to avoid a financial crisis. Paystand provides decentralized finance solutions that aim to streamline and digitize commercial transactions for businesses. Our solutions leverage blockchain technology, ensuring secure and transparent processes automatically logged and preserved in a block. Smart Treasury Management For Accounts Receivable Treasury management involves managing an organization's financial resources to achieve its strategic and operational objectives. This includes cash, funding, investment, trade finance, risk, and working capital management. Through their Paystand account, companies can automatically route money to their chosen accounts. They can also define the maximum deposit amount and state that when reached, the rest of the funds go to an alternative account. This process repeats as necessary and complies with the FDIC insurance, which protects $250,000 per depositor, per insured bank, for each account ownership category. DeFi Card for Instant Bill Payment Paystand's prepaid DeFi Card empowers merchants to utilize the funds received through the network for vendor payments and operating expense management. As receivables arrive, merchants can direct funds to prepaid cards and spend them freely, earning 1% back in Bitcoin on every purchase. With the DeFi card, money doesn’t go through your bank account. You’ll have quick access to your cash without it getting trapped in your receivables. The collapse of SVB has highlighted companies' need for secure cash management. It is essential to safeguard their cash flow and avoid potential market disruptions. Paystand's decentralized solutions offer an alternative to traditional banking, reducing risk and increasing security, scalability, and transparency. In these uncertain times, a secure and reliable financial system is critical. Companies can better manage their resources by adopting decentralized solutions, thus preventing crises and avoiding bankruptcy from disrupting their operations. Reliable, secure access to cash has never been more important than it is now. Let us guide you on the path of new financial technologies in view of a decentralized revolution. Click here to talk to us about how strategic treasury management can help keep your business running in good times and bad.

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