OPTIMIZING CASH FLOW MANAGEMENT USING ELECTRONIC INVOICING
Published on 12 September 2019
Propelled forward by various European initiatives (2010/45/EU on July 13, 2010 and 2014/55/EU on April 16, 2014), invoice digitization has become common all throughout France and is now geared toward a regulated obligation reflecting that of other European nations. Despite representing a considerable time-saver and productivity boost when dealing with invoice processing, e-invoicing might also serve to meliorate company treasuries. This is possible in several ways, but just how can the optimization be heightened? We’ve gone through the ups and downs of electronic invoicing as it relates to management of cash.
Electronic invoicing: accelerating the payment cycle when dealing with transactions
From drawing up of invoicing solutions to their recovery, multiple factors can slow down the payment cycle. These include such issues as poor receipt, litigation, irregularity… Nonetheless, electronic invoicing just might enable a quick fix for these problems.
Ensuring proper receipt of customer invoices
When sending a digitized invoice, it is, however, possible to institute a receipt notice system. Customers receive notifications when invoices become available. Once an e-mail has been opened, the supplier knows that a customer has properly received an invoice and can determine whether said individual has received an invoice in full and due form and go on to trigger the following operations.
React quickly in the event of issue to avoid disputes
When sharing information, it is possible to home in on a problem or error quite quickly in order to completely eradicate it. A missing or erroneous order number may be modified in this manner and doing so shall not slow down the process.
Implement immediate inspection for electronic invoicing
A digitized invoice must include multiple types of information required for validation, such as amount and receiver for instance. When receiving an invoice, some technical rules may be scrutinized in order to reduce the duration of the payment circuit. Consequence? The sooner invoicing problems have been corrected, the more payment processes can be accelerated in order to allow suppliers to be paid at set intervals.
Sharing information to anticipate cash flows
In order to allow companies to negotiate reasonable payment periods, the law on modernization of the economy passed on August 4, 2008 now insists that a payment be made 45 days from end of month following when an invoice is sent or 60 calendar days at most after an invoice has been issued. In this case, the government authorities perform an audit to ensure that invoices were sent at the time they should have been.
Take the example of a major distributor. If it manages to reduce the payment cycle for its invoices from several weeks to several days, a provider can be paid more quickly. If a provider holds this information, cash flow management can be improved. By using a cash flow management software able to perform simulations, providers can learn whether they will be in the red during the month and borrow or invest accordingly. In any case, proper anticipation of cash management flows ensures better management.
Using Dynamic Discount
Ensuring optimal payment deadlines made possible by electronic invoicing is of interest to treasury managers in another way as well: it is yet another driving force behind the generation of additional liquidities.
How, one might ask? By offering sales price reductions in exchange for advance vendor payment. For example, this means that a client can obtain a 2% reduction from a provider for an order paid between 10 and 30 days following invoicing. This was impossible in the paper era, since negotiations can now be performed using digitized exchange.