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Feb 02, 2021“In any business, cash is king, and no matter your revenue model, generating sales is meaningless if you can’t collect the money. While showing consistent growth is essential, maintaining shorter time-to-cash is critical because cash keeps the lights on.” - James Messer, Founder and CEO, Gotransverse, in Forbes
Last month, Gotransverse founder and CEO James Messer wrote an article in Forbes detailing why it’s important for businesses to adopt billing models that enable them to minimize the time-to-cash for each transaction, no matter their billing model. And, he says, as businesses adopt recurring revenue and pay-as-you-go models that introduce monthly recurring revenue (MRR), the problem becomes even more significant. While the more predictable nature of recurring revenue may offer comfort and stability, it doesn’t necessarily guarantee the cash flow, Messer cautions:
“Even with MRR billing, it's still important to focus on cash flow. MRR shows you the value of your subscriptions (i.e., your sales), while cash flow is the measure of money flowing in to support business operations. With MRR, your objective is to shorten time-to-cash and maintain a predictable cash flow so you can manage operational spending and plan for business growth.”
The solution? Automated monthly billing supported by a “reliable and easy-to-configure back-end billing process” empowers businesses to drive growth in a lot of ways — including, Messer says, shortening time-to-cash.
Automating Billing to Shorten Time-to-cash
Messer notes that, according to a CFO Research survey, more than 53 percent of businesses derive at least 40 percent of their revenue from recurring and usage-based billing. And, while these complex pricing models have various significant advantages — from greater customer lifetime value to countless opportunities to grow revenue — they also come with more complex processing requirements that traditional billing systems aren’t equipped to handle.
“More complex billing models typically require more manual processing, which delays invoice processing and reduces billing accuracy. Delayed invoices mean delayed payments and inaccurate invoices resulting in corrections, more delayed payments and an influx of customer complaints. All this impacts monthly forecasting and hinders accurate insight into your business.”
Automated billing systems, on the other hand, lift the burden of manual processing — and all the delays and human error that go with it — speeding time-to-cash on several fronts:
- Going to market with new offerings and pricing structures
- Expanding into new markets with sufficient payment options
- Handling exchange rates, transaction fees, and settlement
- Minimizing collection delays with sophisticated dunning capabilities
- Managing renewals seamlessly
All of these abilities help businesses ensure that, not only are they increasing revenue, but they’re also maintaining the cash flow they need to support operations and drive continued growth. And, by automating billing processes, they’re getting time back, too, to focus on key initiatives rather than minutiae and logistics. In fact, Messer cites a Ventana Research finding that, “2025, 66 percent of finance and accounting departments will be able to close their quarterly books in six business days thanks to technology — that’s double the number of businesses that can do that today.”
The Challenges of Automation
While the benefits of automating billing are undeniable, the process isn’t quite as easy as it sounds, Messer notes. “It requires a clear vision of your business goals and objectives and an understanding of your agile monetization goals.” Too often, he says, companies approach automation like isolated technology deployments, when in reality, they’re strategic business maneuvers that need to be viewed as such; these initiatives should be driven by financial leaders with support from IT — not the other way around.
From understanding key business goals to integrating the new billing systems with other business processes, selecting and implementing an automated billing system must be done with the big picture in mind. For more on what that entails, read the full Forbes article here. Then, when you’re ready, we invite you to learn more about Gotransverse to find out whether our award-winning intelligent billing platform is the right choice for your organization and request a demo to speak directly with one of our experts.