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When you’re building a startup, every minute and dollar counts, so finding ways to streamline is key. One area where you can make a major impact is in payment processes. Surprisingly, about a third of small businesses still handle ad hoc payments manually, even though these make up a big chunk of their revenue. Outdated systems like these can lead to inefficiencies that hold you back, but adopting innovative payment strategies can keep operations lean and cash flow steady — giving you the fuel to grow.
By optimizing payment processes, your startup could save between 60% and 80% on payment processing costs. This can boost your cash flow and free up funds for other critical areas, such as product development and marketing.
Related: 6 Ways to Build a Legacy of Leaders Within Your Workforce
Automate your accounts payable process
Think of the time you’ve spent sorting invoices, chasing down approvals and scheduling payments manually. Automating this process could save time while keeping everything on track without missed deadlines.
Manual payments can lead to errors, delays and missed payments, which in turn can strain vendor relationships. By automating AP, you can streamline your payment workflow. Businesses can save up to 80% on processing costs through AP automation, which also cuts invoice processing time by over 70%. For a startup, that’s not just time saved — it’s time invested back into growing your business.
Some platforms offer AP automation tools that allow you to approve and schedule payments, track invoices and receive real-time updates. Not only will automation reduce human error, but it also provides a single source of truth for all accounts payable data.
Related: Busywork Sucks — How Automation Can Eliminate Boring Tasks for Entrepreneurs
Use real-time payments to keep your cash flow moving
There’s nothing quite as satisfying as getting paid instantly after finishing a job or delivering a product. Real-time payments make this possible, letting your startup move money at the speed of your work. Gone are the days of waiting three to five business days for an ACH transfer; now, your funds can be available in seconds. This is especially helpful when every day counts, like during a growth phase.
As of 2023, 85% of U.S. businesses plan to adopt real-time payments within the next year, and nearly 99% of large corporations (with revenues from $1 billion to $9.9 billion) expect to use real-time payments within the next five years. With platforms like FedNow Service® and the RTP® network, real-time payments are becoming a reality, helping businesses maintain steady cash flow and reinvest in growth faster.
Optimize payment methods for your customers
One of the simplest ways to accelerate cash flow is to make it easy for customers to pay you. Offering multiple payment options — like instant payments, credit cards, same-day ACH transfers and digital wallets — removes friction in the payment process, which means quicker payments and happier customers.
Imagine your customer wants to pay via instant payments, but you only accept credit cards. They may delay payment or even rethink the purchase altogether. Giving customers choices ensures payments come in faster and with fewer barriers. Look for platforms that allow integration with multiple payment methods. Many of these platforms can be customized to fit your payment schedules, giving customers the flexibility they need to pay quickly.
Related: Slow Payment Options Are Costing Your Business — Here’s the Alternatives of the Future
Implement cash flow forecasting tools
Forecasting cash flow is essential when planning for growth. By accurately projecting your cash inflows and outflows, you can make informed decisions on spending, hiring and investing. 82% of businesses fail because of cash flow mismanagement, making cash flow forecasting a critical tool for any scaling startup.
Let’s say your cash flow forecast shows a shortfall in the next quarter. Instead of being caught off guard, you can prepare by either cutting unnecessary expenses or finding short-term financing options.
Use platforms that offer integrated forecasting tools. These tools use historical data to help you make accurate projections, enabling you to plan ahead and make proactive financial decisions that keep your business on track.
Related: 4 Reasons Why Cash Flow Forecasting Is So Important
Take advantage of early payment discounts and negotiate with vendors
Saving on expenses can be as impactful as making new revenue, and one way to do this is by leveraging early payment discounts. Many vendors offer discounts if you pay invoices within a certain timeframe, typically 2-3% off if paid within 10 days. For a cash-strapped startup, these savings add up quickly. Also, establishing solid relationships with vendors through consistent and early payments can lead to better terms and loyalty.
For instance, a vendor offers a 2% discount on a $5,000 invoice if you pay within 10 days. By taking this option, you’d save $100. Apply that across multiple vendors and invoices, and you’re looking at significant annual savings.
It’s worth having a quick chat with your vendors to see if they offer early payment discounts or if they’re open to terms that match your cash flow needs. Showing your commitment to prompt payments can open doors for future perks, whether it’s extra discounts or more flexible payment terms when you need them.
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Nick Chandi