Online accounting company Xero has analysed four million invoices raised by Australian businesses since October 2011 through its software and found that businesses were paid 32 days after invoicing, down from 52 days in 2011.
Xero’s analysis compared monthly invoicing activity for a group of 43,000 businesses over the two years to October 2013. The results showed that, per month, SMEs processed nearly twice as many invoices through Xero and added nearly US$1 billion in value last year compared to two years ago, Xero said in a press release. The company partly attributed the increase in invoices to the global economy recovering from the after-effects of the 2008 downturn.
Xero managing director Chris Ridd told BoxFreeIT that the introduction of online invoicing was one of the main drivers of shorter payment cycles. Xero users could send their customer a link to a web page showing the online invoice with an option to pay it immediately by credit card through PayPal, eWay or other payment providers.
“We have a chart that shows that when we released online invoicing in November 2012 we started to see a significant dip (in the number of days to pay an invoice), which then flattened and then dipped again,” Ridd said. “Fundamentally it’s about having better control of cash flow.”
Online invoicing also showed business owners which customers had viewed their invoices. This made it easier to follow up with a customer about payment.
“If you send a plain paper invoice you have no idea whether (the customer has) seen it. With HTML you know that they’ve seen it,” Ridd said.
Credit agencies have also reporting general improvements in payment terms. Dunn & Bradstreet’s Trade Payments Analysis showed that the average Australian business waited 53 days to be paid.
“Using cloud technology to issue invoices and to monitor outstanding debtors is a major contributor to improving SME cash flow,” Ridd said in the press release. “Reducing the debtor day number is a key part of every small business’ success or failure. If you have cash, a business can pay its bills on time and have cash circulating to help fund business growth.”
