How late payments threaten your business

Over the past months, economists have frequently warned about the possibility of a recession looming over the horizon. The symptoms usually associated with an economic crisis have slowly developed: people and businesses are dealing with increased prices, rising interest rates, the credit crunch and late payments. The recent collapse of Silicon Valley Bank (SVB), added to it the fear that we could soon be facing a contagion effect on other banks. This article will delve into the importance for SMEs (Small and Medium Enterprises) to secure a constant cashflow and how Zimpler can provide an effective solution to mitigate risks during a recession.

The contagion effect

After SVB’s collapse, Goldman Sachs has reviewed its forecasts, increasing the probability of a recession of the US market from 25% to 35% (1). The likely contagion effect will hit other stock markets worldwide, which means that European economies will plummet again into a recession. Concerns have already spilled over into Europe over fears about the health of Credit Suisse (2). Such a contagion effect will inevitably force banks to stiff their credit lines, placing businesses in a position to look after their cash flow more than ever. If you own an SME you need to be aware that you can be particularly vulnerable and you should be prepared to adopt all the measures necessary to mitigate financial risks.?

How can a recession affect your SME?

Businesses like yours can be affected by the recession in several ways. Here are the main threats you need to consider.

Smaller profits: consumers will experience a decrease in their buying power and become more price sensitive and selective in their purchasing decisions. Your profits will decrease and decisions will have to be made to cut costs and scale back operations to save the business.

Reduced cash flow: a contraction in your profits will mean a reduction of the cash necessary to keep your business operational. Customers will take more time paying invoices and you will experience delays in paying your suppliers.

Credit crunch:? another stumbling block that you may encounter during a recession is the fact that lenders will increase their interest rates and introduce stricter lending requirements.

Enter Paylink: the seamless way to get paid

Speeding up the payment of late invoices is one of the areas where Zimpler can help you. SMEs are especially threatened by cash flow issues, as they impair their capability to pursue innovation and they may also affect their employees who could experience delays in the payment of their wages. Enter Paylink, Zimpler’s way to receive payments from your customers by integrating a “request to pay” link directly into an invoice. As the name suggests, Paylink allows customers to pay through a link that takes them to their banking app or online banking via Zimpler checkout, where their transaction is initiated and approved with the latest bank verification methods. Customers do not need cards to make a payment, as the funds are debited directly from their bank account.

The integration process is extremely simple and streamlined and trials of this implementation from Zimpler show that adding a Paylink option saw a 30% increase in invoices being paid within the first week and a considerable reduction in administrative costs. From?a design point of view, Paylink can also be customised to reflect a company’s branding.

How Paylink solved Brommapojkarna’s cash flow issue

When Swedish football club Brommapojkarna, the largest one in Europe in terms of the number of active teams of all ages, was faced with the persistent issue of chasing overdue invoices, they decided to revolutionize the way membership fees could be paid. Whether they were given the choice to pay by semester or yearly, most parents constantly failed to meet the payment deadlines. It was when overdue invoices started accumulating that Brommapojkarna decided to contact Zimpler for help. As it turned out, our Paylink solution fit perfectly with the client’s need for a fast and seamless payment solution.

What appealed to Brommapojkarna about this solution was its simplicity and security as well as the convenience for their members to pay instantly with minimal manual data entry.

Since beginning its collaboration with Zimpler in 2022, Brommapojkarna has sent out 13,500 invoices. Of those, 41% (5,594 invoices) were paid with Zimpler’s Paylink solution and 58% through standard OCR (Optical Character Recognition). Only 1% were paid by card. It is important to note that while OCR payments are still more popular, those payments took an average of 25 days whereas the corresponding number for Paylink was 17 days. The implementation of Paylink also allowed the customer to dramatically reduce administrative costs and optimise the financial department’s time, whose people no longer have to send repeated reminders and call parents to pay their invoices on time.

In the words of Brommapojkarna’s CMO Stina Jansson, ”Zimpler has done a great job simplifying our payment flow. In addition to that, we had the opportunity to have a payment experience that was completely on-brand in terms of design, which has been greatly appreciated by our members.”

Get in touch with us

At Zimpler we look forward to creating long lasting strategic partnerships with our customers. If you need to speed up the processing of your overdue invoices, minimise administrative costs and optimise your personnel’s time, then we should sit down and discuss. If your company is looking for partnering with us to improve cash flow, please get in touch with Zimpler at [email protected]?

(1) Siladitya Ray,?"Goldman Raises U.S. Recession Probability To 35% In Next 12 Months" Forbes, Mar 16 2023, https://www.forbes.com/sites/siladityaray/2023/03/16/goldman-raises-us-recession-probability-to-35-in-next-12-months

(2) Sam Jones, "Swiss regulators voiced concerns in 2019 about ability to save Credit Suisse and UBS" Financial Times, https://www.ft.com/content/125bcf87-c7ee-4ff5-9c90-523571ab94ef