How digital bill payment solutions help maximize cash flow

Maintaining a healthy cash flow is a major concern for any business, big or small. Luckily, digital bill payment solutions can help businesses of all sizes and industries strike the delicate balance between incoming and outgoing funds to maintain a positive cash flow and good financial health.  

What is cash flow?

Cash flow is the net amount of cash or cash equivalents coming in and out of your business. The unique challenges of the past 18 months helped highlight the impact of cash flow, especially on small and medium-sized businesses (SMBs). 

With sales hurting, many SMBs were forced to adapt their business models to new conditions and restrictions. Such changes and turmoils, however, required cash reserves to help them weather the storm.

According to a recent survey by Goldman Sachs, 44% of small U.S. businesses have less than three months’ cash reserves, leaving them with limited leeway should a crisis arise. This doesn’t have to be another global pandemic: a busted pipe or an unexpected mechanical malfunction can also quickly drain your business’s cash flow.   

While cash flow woes have as many potential solutions as causes, new technology can also come to the rescue. 

Have no fear: fintech is here

If you went out for drinks with friends sometime in the past decade and found you left your wallet at home, you’ve probably paid someone back with one of the many peer-to-peer mobile payment apps out there. 

However, when it comes to business-to-business payments, you’re likely accustomed to far less convenient methods, such as paper checks.

The good news is that financial technologies are constantly evolving, and digital bill pay solutions that were once only available to enterprise-level businesses are now becoming accessible to businesses of all sizes. Implementing such tools can help your business eliminate some of the most common cash flow woes.

4 features you should look for in digital bill payment solutions to improve cash flow

Using a digital bill pay solution can help your business’s cash flow by saving time and letting you focus on generating revenue instead of busywork. 

In addition, unlike a physical book or an old shoebox filled with paper bills, digital tools, like Melio, are built to accommodate growth and create the proper workflows from the get-go.   

These are the key digital features that will help you maintain a positive cash flow:

Scheduled payments: Many digital bill payment solutions offer the ability to schedule payments in advance. 

This feature lets you handle all your bills in one sitting, helping you stay organized and efficient. It also means you are paying right on time, not a minute too soon—which could deplete your cash reserves—or too late—risking late fees and penalties. 

Timely payments also help preserve the relationships with vendors you work so hard to create, which translate into attractive payment terms and prices. Both of which further bolster your cash flow.  

Tracking capabilities: Using a digital bill payment solution means you can see all your payments in one place. This lets you keep track of funds coming out and see the status of each payment in a single dashboard. 

Using the same tool for accounts receivable makes it even easier to plan ahead and know how much cash reserves you have to play around with at any given time. 

Choice of payment methods: Alternating between payment methods is a great way to maneuver cash flow obstacles, and it’s also super easy when you’re using the right tools.

Digital bill payment solutions often offer free bank and ACH transfers, helping you save on fees whenever possible.

Some tools also offer the ability to pay business bills with a credit card, even if your vendors don’t typically accept cards. This way, your vendors get paid right away, in whatever form they prefer, while your business enjoys additional float until the card’s next billing cycle. You also get to collect card rewards and cashback for significant expenses, which means additional savings boosting your cash flow.

Fast pay options, such as push-to-card, are also available for those last-minute payments you had to put off until that check finally came in the mail.  

Approval workflows: As your business grows, you may find that managing your bills is no longer a one-person job. Whether you assign an employee to it or hire an external accountant, you’ll still need to keep an eye on the comings and goings in your bank account to avoid surprise payments depleting your cash. 

Imagine, for example, you have an abnormally high electricity bill that you’re planning to put off until its due date. You’re expecting to have more funds coming in by then, and you also have more urgent bills to pay now. An employee who lacks this overview might choose to pay the bill early and get it out of the way, unaware of its cash-draining potential. 

Fortunately, many digital bill payment solutions have built-in approval workflows that allow you to collaborate with others without losing control over the process. These tools let you invite users and assign roles and permissions. You can also use them to set thresholds for payments requiring approval, so you won’t have to deal with every dime spent.

In summary

A good digital bill payment solution harnesses the power of technology to help businesses maintain financial health and preserve cash flow. Such tools are now widely available to smaller companies, combining the convenience of consumer payment apps, like Venmo, with enterprise-grade features built specifically for B2B transactions.