When Extended Payment Terms on Invoices Start Squeezing Cash Flow and Working Capital, Black Women Entrepreneurs Benefit from Getting Paid Immediately.
Starting and running a business is hard enough in the best of times, but when the economy grows uncertain, it becomes even harder, especially for minority women-owned small businesses. Yet, over the last few years, record numbers of women from historically underserved segments of the population have been defying the bad news to start businesses for their chance to get a well-deserved piece of the American Dream.
Black women-owned small businesses have been leading the business start-up trend since before 2018 surveys showed record numbers compared to other demographics. Many of those new businesses earn their revenue by selling goods and services to other businesses and the government. To do so, they extend trust to new clients by delivering products and skills now in exchange for getting paid later on, possibly weeks or months after the deal is done.
Unfortunately, the economy is currently suffering from high inflation, bulging interest rates, and global supply chain disruptions that make waiting to get paid an uncomfortable proposition for small businesses that need money now. Because businesses owned by Black women are especially vulnerable in the face of an economic downturn, the need to be paid as fast as possible is more important than ever.
Extended Payment Invoices Increase the Chance of a Cash Flow Crunch.
‘Merchant Credit’ is familiar and expected in the B2B (business-to-business) and B2G (business-to-government) sectors. The problem stems from extending long-term payment terms during a disjointed, inflation-fueled, post-pandemic economic environment.
Long-term payment agreements on invoices make doing business harder in a slow economy:
- The first problem with issuing 30, 60, 90, and 120-day invoices is that the average waiting time for invoice payoff on a 30-day agreement is 65 days. Can you imagine how long the average is for sixty or ninety-day invoices? Yes, the small business community has survived on extended-term accounts payable for decades, but that fact is cold comfort when you need to be paid immediately to fend off cash flow crunches resulting from waiting on clients to pay.
- Bills, debts, and other obligations can easily pile up into a desperate situation when your cash flow is tied up in unpaid invoices. Your pressing day-to-day business needs don’t cause your client to lose sleep at night, and other than asking politely or incentivizing for early payment, they get to enjoy the breathing room you give them. You, meanwhile, have to worry about
● Payroll and compensation for your employees and staff. In a post-pandemic, inflation-fueled economy, not only are workers demanding more pay and benefits, they easily lose patience with any company that has a problem meeting payroll.
-
Equipment, real estate, vendors, and suppliers all want to be paid on time in accordance to whatever payment agreements are established. Just as you don’t want to wait to get paid, neither do they.
● Rising prices from rapidly expanding inflation. Every day that an invoice remains unpaid and cash flow uncollected, the cost of doing business goes up slightly. Forbes, Wall Street Journal, and Bloomberg Financial News all report that most small business owners surveyed cite rising supply costs as a drag on business performance.
Passing those higher material, supply, and equipment costs on to customers is part of the inflation problem.
- Cost of Money (COM) is a real concern when interest rates are rising steadily combined with inflationary prices. A ten thousand dollar invoice for products and services you’ve provided loses value slightly with each passing day as the weeks and months go by.
If you get paid three months from now, the cash received might not purchase as much as it would have previously. If you have fleet vehicles, you may have seen this problem play out in real-time as vehicle prices skyrocketed because of supply chain disruptions.
- Time spent on accounts receivable, follow-up, and collections on invoices that pay too slowly, pay late, or slide into default can be a very unpleasant experience. In an economy as tough as we’re in now, small business owners are too often required to get tough, act out of character, and suffer stress chasing down money from clients.
Nothing ruins customer relationships faster than stepping into the role of a collection agent.
If you didn’t have to wait on invoice payments, life would be so much easier, wouldn’t it?
- Slow-paying invoices can put your business in such a working capital bind that it can negatively impact both your business reputation and creditworthiness.
A souring credit picture or reputation as an unreliable vendor is difficult to overcome, and the faster you get paid by clients, the better protected your business is.
- Weak cash flow and slim working capital margins make your company less competitive, causing you to risk losing out on opportunities to bid on larger contracts or take on more prominent clients due to a lack of resources or ability to meet the demands of new contracts.
Waiting on extended payment term invoices puts your small business at higher risk of being unable to compete for more business against companies that have capital available to do quick turnaround times to deliver the goods and services. If your working capital is waiting in the form of invoices, then it is unusable as tender.
As hungry as your small business is to move inventory, improve sales, and increase its client base, piling up unpaid invoices while waiting weeks or months for compensation is a precarious monetary strategy.
Why Funding is the #1 Concern for Black Female Entrepreneurs.
Once a business is up and running, the best source of working capital comes from inbound cash flow from the sale and delivery of goods and services at a profit margin that fosters sustainability and rapid growth. On the other hand, when a company is undercapitalized, it inevitably finds itself in a financial bind, unable to fully meet its financial obligations.
To successfully transition from a new startup into an established, stable company, small businesses need enough capital to cover the costs of doing business with enough remaining to reinvest for efficiency, improvement, and growth.
Because Black women-owned businesses are historically underserved by the lending industry, the biggest hurdle to business is, in most cases, finding ways to improve inbound cash flow because it is the best solution for raising working capital without adding debt and liability.
According to Business News Daily, Black women are the largest group of female minority business owners, with over two million businesses. However, while 4.5 times more likely to start a business than other segments, African-American females are 19% less likely to be approved for financial start-up assistance.
On top of all that, minority women-owned small businesses find themselves fighting lingering social and cultural injustices for an extra layer of challenges. Despite decades of hard-fought civil rights battles, underserved business segments face systemic discrimination, disrespect, and increasingly restricted access to capital and credit resources when economic trends turn sour.
For that reason, many Black women entrepreneurs use alternative means to get up and running. After this, those same businesses lean on creativity, determination, and quality customer relationships to generate cash flow and build a strong working capital position.
Strengthen Your Cash Flow and Working Capital Position Using Existing Client Invoices.
For those minority women-owned businesses that sell to other businesses and government agencies, client invoices are the convenient, safe alternative for boosting cash flow to strengthen working capital reserves. Why wait to get paid only to lose value in the transaction thanks to inflation and interest rates? Since you have already fulfilled your part of the agreement, you should enjoy the benefits that B2C (business to consumer) merchants do as they get paid by credit card.
NowAccount is the revolutionary patent-pending Accelerated Invoice Payment System that empowers Black Women-owned Businesses to do business with other businesses and government clients without worry, and without waiting long periods of time to get paid.
With NowAccount, you can get fast access to cash flow and working capital by converting unpaid, extended-term invoices to liquid revenue deposited into your business bank account.
The Accelerated Invoice Payment System gives you the power to transact business with your trusted client in a way that is convenient for both parties but puts you at an advantage because you no longer have to slow business pace to wait on revenue. That means no more robbing Peter to pay Paul or making excuses to vendors and creditors. Here are even more benefits:
- Get paid immediately so that you enjoy the kind of convenience that retail merchants do when they get paid by credit card. Worry, stress, and desperation for working capital lose their grip on your business experience when your labor is rewarded in time to meet and exceed daily business needs. Getting paid quickly can make the biggest difference in how fast your company grows.
- NowAccount helps your company maintain a strong balance sheet by avoiding further debt or liability because it is not a loan and not invoice factoring. The cost and availability of business loans and lines of credit have priced out many entrepreneurs by eating too much into profits.
- You can incentivize clients by offering them extended payment terms (and upon request) without risking your inbound cash flow. NowAccount lets you relax with complete confidence knowing that you can upload the client invoice to NowAccount and eliminate the invoice waiting period. Let them pay later because you get paid immediately, regardless of whether it is a 30-day or 90-day payment term.
- NowAccount infuses your small business with new flexibility and power to compete against larger players for desired contracts with choice client prospects. While your small business peers may be shy about reaching out to land larger accounts, your company can scale revenue by bidding on projects knowing you’ll have the necessary cash flow available for staffing, equipment, supplies, and inventory to carry out the job.
- Retain more of your invoice face value, beating inflation by having invoices converted at the outset of a business transaction so that the cash value isn’t negatively affected by rising prices. Waiting two or three months can lower the purchasing power of an invoice’s face value by hundreds if not thousands of dollars over a period of weeks if economic trends turn south. By turning unpaid accounts into fast revenue, you can keep more of what you earn by putting it to use before further erosion of real-world financial worth.
Another drain on the spending power of client invoices is alternative funding sources like Invoice Factoring Companies that charge hidden fees, penalties, and disguised interest rates. Some invoice factoring providers also engage in a practice where they only pay you a partial amount for your invoices up front, forcing you to wait for the rest in the same inconvenient, worrisome way you normally do.
NowAccount pays you the full value of the invoice minus a small, flat, one-time merchant fee, which is why it is convenient, like taking a credit card. No holding back. No hidden fees. No disguised penalties.
- Lower risk and maintain your privacy and reputation using NowAccount’s completely transparent setup and qualification process. There will be no team of heartless bean counters making you personally jump through hoops to impress an algorithm. Instead, you can use your reliable client as the basis for getting paid quickly and removing pressure from yourself.
As a ‘Non-recourse’ small business invoice payment solution, there is no worry over putting up personal or business collateral, and your company will not be held liable even if the economy takes a turn for the worse, causing your client to have payment problems. You can focus on the areas of the business you enjoy and leave all revenue collection worries to us.
Free Up Cash Flow and Improve Your Working Capital Working Capital Picture Today.
Historically, minority-owned businesses led by women entrepreneurs have faced discriminatory funding and payment practices that only worsen when the markets suffer. Empowerment can be yours with Accelerated Invoice Payments through NowAccount as they help ensure your Black Women-owned small business gets paid as the economy grows tighter.
When clients start making choices as to who gets paid, and when, according to their working capital and business goals, NowAccount ensures your small business will always be number one in line to get paid.
The post A Better Cash Flow Solution for Black Women-owned Businesses appeared first on Now.