How instant credit makes cash flow concerns a thing of the past

Friday, October 11, 2019

We’ve all heard the saying, “cash is king,” and despite the widespread use of trade credit and credit cards in business, this saying is still true in 2018 as it was the year it was invented. In fact, poor cash management is the cause for more than 80 percent of failed businesses. It’s kind of absurd, when you think about it, that in today’s modern, tech-driven technology, businesses can’t do a better job of managing their cash.

That is, until you think about the reasons behind that. While it’s true that there are some business owners and management who do a poor job of cash management, there are other constraints posed that can threaten a businesses’ cash flow. Some of that has to do with customers who may be slow to pay for goods or services. When a business pays its bills on time, but its customers don’t, it will most likely experience a cash crunch at some point.

Another key reason is that the traditional avenues available for B2B credit are simply insufficient, and therefore have the ability to cause delays in payments and order processing.

Luckily, there’s new, technologically-driven way for B2B sellers to quickly provide credit to businesses when they need it, and not a days or weeks later. That’s instant credit. It turns out that providing instant credit can help both B2B buyers and sellers manage cash flow better, making everyone happy in the end. Let’s take a look at these two scenarios to better understand why this is true.

Buyer’s perspective

Another truism in business is that time is money, and B2B buyers often don’t have time to wait several days to get approved for credit, nor do they always have the credit available with credit cards. If they can’t place their order, they likely won’t receive it on time, and they therefore can’t produce and ship their products. All the while, the clock is racing against them from a cash perspective. With instant credit, however, they can complete purchases faster, get their receivables faster, and ultimately send invoices for their own products and receive payments faster. By shortening the process of getting credit, buyers get to shave precious time off their own clocks, which equates to being cash flow positive at nearly any given time.

Seller’s perspective

We’ve talked in the past how instant credit can be used to increase order sizes and customer loyalty. Instant credit also has some distinct advantage from a cash flow perspective, as well.

When a buyer is approved using instant credit, the credit line is with the provider and not the seller. That means that sellers get paid faster and they’re not on the hook for the cost of the purchase. Depending on the industry, it may be common to wait 100 days or more for payment versus a lightning-fast cash infusion using instant credit. Plus, they don’t need to waste time following-up with customers who are late, which certainly saves time and money from a personnel standpoint. Lastly, there are no charge-backs like those from a credit card, which can sometimes happen months after a purchase is effectuated. Charge backs are the most hazardous risk associated with credit cards, given that the seller is out both their goods and the money they received.

Thank you! Your submission has been received!
Oops! Something went wrong while submitting the form.