Reduce the impact of cash flow gaps on your business and personal health

by XBert Team ~ 6 min read

Overdue invoices are a major cause of financial stress for small business owners. XBert can help you better manage debtor risk and your bookkeeping, saving you time and money.

Running your own business can be rewarding and bring success and satisfaction; it can also be risky, demanding, stressful and at times, completely overwhelming. The hours are long, there are new problems to overcome and pressures to face constantly, mounting bills to pay, and you rarely feel like everything is under control. Bookkeeping and admin are often squeezed in whenever you can, and a lot of time is spent chasing money you're owed. Without positive cash flow, you have trouble paying your bills and debts, wages, taking on new clients, ordering goods and services, undertaking new opportunities and upgrading your equipment.

What if you had a simple and straightforward method to stay a step ahead of cash flow and financial risks, used payment behaviour to know when bills and invoices were unusually overdue, could collaborate with your bookkeeper and accountant efficiently, and saved time and money? That's where XBert can help.

XBert uses machine learning to detect anomalies, patterns and errors in your Xero cloud accounting data and alert you in real time to risks.

For invoices, XBert uses payment behaviour rather than due dates to alert you when late payments are unusual for your client or customer. You are prompted to check if the invoice was actually sent or received, if the customer contact for payment has moved on or if your customer is experiencing financial stress.

With XBert, you can take steps early to address any impacts on your cash flow. You can correct any errors or duplicate contact records, bills or invoices, know when you should or shouldn't be paying GST, and reduce the risks associated with unregistered or cancelled businesses.

XBert's automated audit and risk detection don't just save you money, but also effort. You spend less time and resources searching for and fixing errors, performing manual GST, ABN and ABR checks, or chasing invoices before your customer usually pays them. Your books will be more accurate and you'll have a more accurate picture of your business' health.

The health of your business and you

Not surprisingly, the strains faced by small business owners affect their health and wellbeing.

In NSW, a study found that small businesses make up 98% of all active businesses. Most are single owner/operator, followed by small businesses with fewer than five employees. Results showed that NSW small business owners regularly experience anxiety and depression. One of the key contributing factors to poor mental health is financial stress due to unpredictable income and the late payment of invoices. Other factors include feeling obliged to work when sick, the risk of failure (many start-ups fail within the first two years of operation), working in isolation, and gaining work-life balance.

Of the respondents, 85 per cent often 'take their job home', 43 per cent said they work every weekend, and almost 80 per cent said their business problems kept them awake at night.

Cash flow drives financial sustainability, growth and operations. The uncertainty of income and invoice payments-not knowing when or if payment will come-places enormous pressure on small business and hinders expansion and decision making. It's not uncommon for owners to dip into personal savings and income to cover negative cash flow. All that time taken for additional admin and chasing debtors is valuable time away from other aspects of the business, family and friends.

Late payments diminish your ability to pay employees and suppliers, further impacting the economy.

How bad is it?

Figures from Xero on the cash flow gap show that over 62 per cent of Australian small businesses encounter late or unpaid invoices each year, and 65 per cent had invoices overdue by more than 30 days during the six months prior.

Additionally, 71 per cent of business owners said supplier's payment terms were often longer than their own, or their terms weren't adhered to. Almost 25 per cent say they wouldn't survive a month if all invoices owed to them were left unpaid, while 62 per cent said they wouldn't last more than three months.

Big businesses are some of the biggest culprits. They pay 53 per cent of their invoices late, on average 23 days late while some take 120 days to pay, making them responsible for an estimated $115 billion in late payments to SMBs each year.

As a single operator, or a small business with limited staff, resources and sway, there's not much you can do other than repeat payment requests and wait.

Reasons for late payments

There is an endless number of reasons why invoices are paid late. Some common ones are:

  1. Different payment terms – Your customer or client payment terms may be longer than yours. When trading with big businesses, they hold power and often dictate when payments occur.
  2. Your customer or client is also awaiting payment – They may not be able to pay you until they get paid.
  3. They're busy too – Perhaps your trading partner just one person trying to make ends meet whose fallen behind with their accounts.
  4. Inadequate process – Maybe they don't have the right tools, proper system, or the people available to manage their accounts.
  5. They're under financial stress – They may be struggling and on the brink of collapse.
  6. Your records are outdated or wrong – Duplicate contact records or records with incorrect information can mean invoices get sent to the wrong person or the wrong address. Duplicate bills and invoices raised can mean you spend time chasing money you're not actually owed.
  7. They never received your invoice – Was it sent? Perhaps your contact person is no longer there, or the invoice ended up in their email spam folder.

Tips to help manage cash flow gaps, overdue invoices and debtor risk

There are steps you can take time to help manage invoices, cash flow and risks, and avoid unnecessary debt.

  1. Set aside regular time for admin and bookkeeping, weekly if possible.
  2. Keep your contact records updated.
  3. Send bills and invoices promptly and ensure they're going to the right people.
  4. Have fast and simple payment methods in place for your customers.
  5. Use the right tools that clearly show the up-to-date financial status of your business and cash flow.
  6. Be certain of your trading partners. Ensure they have a valid ABN and their details match the Australian Business Register (ABR) record. A business can cancel their registration at any time, and there are much higher risks when trading with unregistered companies. A quick Internet search and credit checks are other ways to research a company.
  7. Confirm your trading partners' GST registration status using the ABR. If you do pay GST and your supplier is not registered to charge it, you may never get that money back. Businesses can deregister for GST at any time so check statuses regularly.
  8. Use payment behaviour to assess debtor risk, so you don't waste time chasing overdue invoices before your customer or client usually pays them. As an example, for the last six months, your client has paid invoices after 30 days; there's little point chasing them after 14 days. However, if more than 30 days have passed, there is increased debtor risk.
  9. Regularly review your payment terms for notoriously late-payers. You can demand part or full payment upfront, negotiate a payment plan, withhold additional goods and services until paid, charge late fees, or cease trading with them.

XBert in action

XBert's algorithms and machine learning technology analyse your cloud accounting data to give you and your bookkeeper real-time alerts for cash flow, debtor or other financial risks.

XBert detects anomalies and patterns in your cloud accounting data and monitors the ABR continually for changes related to your contacts - so that you don't have to.

You receive alerts when an invoice or bill payment is outside the normal behaviour for that particular contact or if any possible duplicate contact records, invoices or bills are raised. You're alerted if you raise a bill or invoice with GST and the charging business is not GST-registered, if an ABN or business name doesn't match the ABR or is a cancelled business, and much more.

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You can investigate the issue and resolve the risk quickly using direct links to the associated Xero entry or ABR record. Invite your financial team, bookkeeper and accountant to XBert so you can collaborate with them to save your business money.

Peace of mind with better credit management and bookkeeping

XBert is a low-cost and easy-to-use solution that will keep you on the front foot of cash flow and debtor risk management.

XBert can help you reduce the financial and personal stress of owning a business, avoid potential money loss and work towards business growth.

Overdue invoices outside normal behaviour and cash flow impacts are just some of the many risks XBert will find reviewing your accounting data on an hourly basis. Using sophisticated algorithms, predictive analytics, and machine learning, XBert is there to detect business risks and save you money.

If you're serious about business success, sync your accounting data with XBert, and in just a few minutes, you'll discover the amount of money at risk and how to prevent losing it. Book a demo or start your FREE 14-day trial now!

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