The Impact on Cash Flow
It’s hard to underestimate the importance of cash flow on business health. In fact, the Nebraska Business Development Center argues that cash flow is actually more important than profitability. While profit figures can be manipulated, cash flow provides a more accurate indicator of a company’s financial health and can be used to support growth and secure financing.
Your payment strategy plays a vital role in maintaining healthy cash flow.
- Liquidity. If your payments are tied up for days or weeks, your cash flow can become bottlenecked. Payment processes that avoid this can improve liquidity.
- Tracking. Being able to track individual payments helps you manage your payments to ensure that nothing falls through the cracks. If there is a problem, real-time tracking provides the insights you need to address the issues immediately.
- Reporting. To identify the strengths and weaknesses in your current payment processes, you need to be able to run on-demand reports. These reports can provide the insights needed to finetune your business strategies.
The Impact on Customer Experience
Payment snags can drag down the customer experience and result in customer churn. To keep customers happy – and to keep them, period – businesses need a winning payment strategy that addresses common customer pain points.
- Speed. According to PYMNTS, data from the Federal Reserve shows that demand for instant payments is growing. For insurance payments, one-third of consumers prefer instant payment channels, while 27% prefer instant payment channels for refunds.
- Choice. New payment channels are taking off. For example, Forbes says that 53% of people now use digital wallets more often than traditional payment methods, 47% of Americans report spending more money when using digital wallets compared to traditional methods, and 51% say they would stop patronizing a merchant that doesn’t accept digital wallets. Businesses that offer a mix of traditional and modern payment channels can appeal to the largest audience.
- Convenience. If payments are a hassle, consumers may not make them. By making the payment process easy, businesses can promote timely payments and increase retention.
- Engagement. When businesses communicate with and engage customers, payment processes can go more smoothly. For example, for recurring payments, reminders can help prevent missed payments. After payments, confirmation messages can give customers peace of mind.
- Security. Customers want to know their payment information is in good hands, and data breaches can erode consumer trust. Secure payment processes are a must.
The Impact on Your Bottom Line
Many businesses operate on thin profit margins, and costs associated with payments can make the difference between profits and losses.
- Chargeback management. Some chargebacks are legitimate, but chargeback fraud is a growing problem for many businesses. As a result, being able to manage chargebacks is increasingly important.
- Processing fees. If you’re paying a 2% processing fee, you’re losing $20,000 for every $1 million in revenue. Payment processing fees add up fast, and even a small savings can have a big impact over the course of a year.
- Regulatory compliance. Some industries, including insurance and property management, have strong regulatory compliance requirements. Noncompliance can lead to fines and lawsuits that hurt your bottom line, so it’s important to have payment processes that support compliance.
The Impact on Business Growth
Put everything together, and it’s clear your payment strategy can help drive business growth – or it can impede growth.
- Customer retention. If you’re losing customers because of missed payments or payment-related frustrations, growing your business becomes an uphill battle.
- Resource management. Inefficient payment processes can eat up your time and money, and that leaves fewer resources to dedicate to activities that fuel growth.
- Flexibility. A good business strategy isn’t static. You need to be able to pivot, and flexible payment processes can help you do so successfully, for example, by letting you switch payment channels and by supporting cash flow.
Is Your Payment Strategy Supporting Your Business Goals?
If your payment strategy isn’t supporting your business goals, it’s time for a change. Tranzpay supports inbound and outbound payments through a wide range of channels, with fees as low as .95% per transaction. We also offer tools to support customer engagement, payment tracking and reporting, and we are PCI DSS and SOC2 compliant. Learn more.
