IT services firms face a slew of challenges in 2024 that are disrupting project timelines, driving up costs, and squeezing profit margins. Here's the twist: most of these issues come from within the organization, not external factors. Recognizing where your processes slow you down is key to fixing them and keeping your business on track.
In this blog, we're diving into the top challenges confronting technical services companies this year and showing you why automating your financial operations with accounts payable and accounts receivable software is essential. Let's get started.
IT Firms Are Behind in their Finance Tech Stack
Technical services firms are the backbone of digital transformation, helping businesses around the world upgrade their systems and modernize their operations. Yet, there's a surprising technology gap when it comes to their internal financial processes. As a result, these firms wait, on average, 68 days to get paid, which puts a serious strain on their cash flow and threatens business continuity.
This is where Accounts Receivable (AR) and Accounts Payable (AP) automation can be game-changers. AR automation speeds up collections, reducing days sales outstanding (DSO) and getting cash in the door faster. AP automation, on the other hand, streamlines payments to suppliers and vendors, ensuring that your operations run smoothly. Automating both AP and AR allows your entire cash flow cycle to become more efficient and predictable, helping you avoid the negative cash concerns resulting from long payment cycles.
In the following sections, we'll delve deeper into the finance hurdles facing technical services teams today. We’ll also demonstrate how AR and AP automation together help these firms maintain a healthy cash flow, leading to greater stability and more successful projects.
Top Finance Hurdles Facing IT Services Firms in 2024
1. Project-Based Invoicing
Technical services firms often deal with a unique challenge: project-based invoicing. Unlike businesses with fixed fees or recurring charges, these firms bill clients based on project milestones or specific deliverables. This billing structure, while flexible, can complicate accounts receivable (AR) management, resulting in delayed payments and unpredictable cash flow.
AR automation simplifies this convoluted process by enabling finance teams to customize invoice delivery to match project milestones. This way, the right invoices reach clients at the right time, reducing the likelihood of errors and delays. Tailored collection workflows further streamline invoicing, allowing companies to track and manage payments on a project-by-project basis.
Additionally, AR automation's custom fields let finance teams tweak invoice details and payment terms to suit each project's unique requirements. This flexibility not only makes project-based invoicing easier but also enhances the accuracy of billing, leading to faster payments and a more consistent cash flow.
By embracing AR automation, technical services firms can overcome the hurdles of project-based invoicing and keep their cash flow on track, allowing them to focus on delivering top-notch services to their clients.
2. Complex Billing Requirements
Technical services projects often come with complex billing requirements. You might need to track billable hours, project expenses, and milestone achievements, all while ensuring accurate and timely billing. Trying to manage these intricacies manually is a recipe for errors, disputes, and prolonged payment cycles.
Centime’s AR automation offers a streamlined solution to these challenges. By automating collections and providing a user-friendly customer payment portal, businesses can get paid up to 30% faster. The customer portal empowers clients with self-service access to detailed billing information, allowing them to quickly resolve any billing inquiries or discrepancies. This not only gives clients more control over their payments but also improves their overall experience, leading to higher satisfaction and faster payment turnaround.
Centime’s Autopay options further simplify complex billing scenarios by automating regular payments, reducing manual effort, and minimizing errors. This ensures prompt and accurate payments, helping technical services firms reduce Days Sales Outstanding (DSO) and focus on delivering quality services.
"Even if we put some Customers on Autopay, there is a significant benefit” - K2 Services
"No more collections!" - R3
With these AR automation features, technical services firms can navigate even the most complex billing requirements with ease. By streamlining processes and offering clients a seamless payment experience, businesses can improve cash flow and build stronger relationships with their customers.
3. Client Payment Delays
The average IT services company waits almost 70 days to get paid. The reasons vary—from project scope changes to client budget constraints or lengthy approval processes. No matter the cause, these delays throw off cash flow projections and complicate working capital management.
AR automation is the answer to minimizing client payment delays. It streamlines collections by automating key tasks and speeding up the payment cycle. Collection workflows send out proactive payment reminders, so clients are less likely to forget or miss payment deadlines. If there's a delay, these workflows quickly escalate the issue to address it before it impacts your cash flow.
Automated and manual tasks help internal teams stay on top of resolving payment delays. These tasks guide the team on what needs attention, reducing bottlenecks. Client tasks, on the other hand, nudge clients to take specific actions, like resolving disputes or confirming payment details. This collaborative approach to collections ensures that payment issues are resolved quickly, reducing the overall delay.
By accelerating the collection process, AR automation boosts cash flow predictability, allowing technical services firms to focus on what they do best—delivering exceptional services to their clients. With fewer client payment delays, your business stays on track and is better positioned for success.
4. Client Relationship Management
In the technical services industry, accurate and timely billing is key to strong client relationships. Delays or errors can erode trust, leading to dissatisfaction and even contract disputes. AR automation transforms client relationship management by personalizing interactions, boosting transparency, and improving responsiveness.
Custom collection workflows let you tailor communications to each client's unique needs, fostering satisfaction and building rapport. Meanwhile, customer portals offer a self-service hub where clients can access account information, review invoices, and manage payments, adding a layer of transparency that builds trust and reduces disputes.
Tasks, both automated and manual, support a collaborative approach to resolving client inquiries or issues. Automated tasks ensure quick and efficient responses, while manual tasks provide a personal touch when needed.
With these AR automation features, technical services firms can strengthen client relationships through smoother communication and faster responses. The result? Happier clients and a more reliable cash flow.
5. Inefficient Payment Processes
Technical services firms often suffer from inefficient payment processes that can lead to costly delays and late fees. Slow or error-prone processing can block accounts and disrupt cash flow, creating a domino effect that strains vendor relationships and puts your supply chain at risk. When payments are late, vendors start to lose trust, which can result in unfavorable terms or even a complete halt in business dealings.
With AP automation, technical services firms can transform inefficient payment processes into efficient, cost-saving operations, leading to stronger vendor relationships and a more stable supply chain.
Centime's AP automation streamlines payments and enables you to capture 97% of early payment discounts, eliminate late fees, and earn cash-back rebates with virtual cards. This turns a potential cash flow headache into an opportunity for savings. The platform also provides secure and flexible electronic vendor payments, reducing errors and giving you more control over your payment schedule.
6. Scattered Data Management
Managing vast amounts of data across systems in technical services leads to inefficient and duplicated efforts, hindering operational efficiency and strategic decision-making.
Centime’s all-in-one cash management solution consolidates accounts payable (AP), accounts receivable (AR), working capital, and forecasting into a single interface and establishes one source of truth for data. This centralized platform makes accurate reporting a breeze so you can unlock valuable insights into your financial performance across the entire cash lifecycle with robust forecasting and reporting capabilities, empowering informed decision-making and strategic planning.
Conclusion
Technical services firms face a challenging road ahead in 2024, with internal inefficiencies often leading to delayed payments, disrupted cash flow, and strained client relationships. To navigate these hurdles, AR and AP automation are not just helpful—they're essential.
From reducing Days Sales Outstanding (DSO) to streamlining complex billing requirements, AR automation can transform your financial operations. It empowers you to customize invoice delivery, automate collection workflows, and offer self-service customer portals for faster payments and better client satisfaction. This streamlined approach to accounts receivable boosts cash flow predictability and lets you focus on what matters: delivering top-notch services to your clients.
On the accounts payable side, AP automation helps reduce manual coding, eliminate late fees, capture early payment discounts, and earn cash-back rebates, turning a potential problem area into a source of savings. This automation also leads to improved vendor relationships, reducing the risk of supply chain disruptions.
But it doesn't stop there. With Centime's all-in-one cash management solution, you can consolidate data across AP, AR, working capital, and forecasting, giving you a single source of truth. This centralized approach provides robust forecasting and reporting capabilities, allowing for smarter decision-making and strategic planning. Click the banner below to try the platform for free today.
