Last week I was having a problem with my toilet not flushing. It was definitely not something I wanted to deal with personally so I turned to a well-known home services marketplace to find a plumber.
The experience was awesome – I put my job up for bid, read through multiple quotes and reviews, hired the contractor, and communicated with him throughout the process all from the comfort of the app on my phone. It makes me wonder why anyone would ever do a Google search to find a local tradesman.
The only glaring omission? When it came time to settle up for the work, I was left with the same old payment methods that my parents would’ve been presented with decades ago – pay the contractor in person with cash or check based on a hand-written invoice created on the fly.
Seriously? After all the slickness of managing the entire project via an app I have to fumble through a drawer and dust off my checkbook? What would’ve happened if I couldn’t find said checkbook and didn’t have any spare cash laying around? The contractor would’ve left with the task of collecting payment after the fact. Luckily for my contractor I was able to find my checkbook after about 10 minutes of searching.
This got me thinking that there are lots of contractors performing services where an invoice is presented to the customer after services are rendered, whether that’s delivered in person or via email. Tracking down payment for these invoices is not only a major time-sink, but it also wreaks havoc on cash flows for small businesses. Not to mention the bookkeeping headache of reconciling all those paper checks and making sure customer accounts are properly notated after they finally pay.
The solution? Levering payments to help electronic invoice platforms close the loop, create real value for merchants, and help customers pay conveniently and with peace of mind. Doing so has three key advantages that we can look at briefly.
1 – Shortening collection cycles
When contractors, tradesmen, and other merchants have the ability to electronically collect their fees, it greatly reduces the number of cycles (and days) that it takes to actually receive payment. One prominent e-invoicing platform I spoke with recently mentioned that their customers typically get paid in about 2 days on a Net30 invoice. Pretty remarkable!
2 – Improving reconciliation
When customers pay by cash or via check, it’s very difficult to reconcile their accounts. Doing so is predominantly done manually, by entering the details into the business’ internal accounting systems. This process is time consuming and ripe for error. Integrating electronic payments into the invoicing process solves these issues. No more manual intervention. No more accounting errors. Just clean books.
3 – Reducing the likelihood of payment ‘shrinkage’
Paper checks get lost. Cash goes missing. The unseen cost of physically managing a paper invoicing process is tangible. Many merchants will tell you that the process of getting checks and cash to the bank is a major headache. Integrating electronic payments into an e-invoicing platform takes care of the problem by eliminating any risk that a check bounces or that cash never makes it to the bank.
Luckily for both myself and the contractor who came to my house, the job went as planned (even though he did have to make a follow-up visit) and, despite the speedbumps of getting him paid everything ended up working out. I just hope he doesn’t lose my check on his way back to the office.