Almost every modern business relies on providing services and products in exchange for money. It is the method of income generation that keeps the business going.
Many businesses rely on receiving cash payments from their customers at the time of service delivery. Take restaurants, barber shops or your local retail store, for instance. These businesses expect payments at the conclusion of services or product exchange.
However, for an increasing number of businesses, payments are delayed and received later. The service provider issues an invoice to the customer at the time of service delivery and payment is received based on pre-agreed terms.
This method of delayed payment is commonly used by freelancers, contractor and SMEs in servicing businesses. It is popular because it gives the customers time to review the level of service and a short-term credit.
Problems for the Service Provider
While the invoice pricing method is beneficial for the customer, it can create a number of problems and financial uncertainty for the vendor.
Most service providers don’t mind a delay of a few days to a week. However, customers can drag payments out for several weeks. Data shows that average time for receiving invoice payments is up to 60 days.
Service providers dealing with a large firm may feel helpless as they are passed around from one person to the next in different departments. Many freelancers experience communication problems when dealing with a large client.
Data also suggests that a large number of invoices are still generated manually with an average cost of $12.90 per invoice. These invoices are also subject to human error.
Most invoice processing transactions involve money transfer from the client’s bank to the vendor’s bank account. This method has a high cost for both parties, slower processing times and based on centralized platforms which have proven inefficient.
Lastly, the current system of invoicing requires a certain leap of faith by the service provider. Business insights reveal that up to 70% of new business relationships require the parties to make decisions based on perceived value and unknown risk. This can increase the cost of due diligence for businesses.
The Solution for Businesses
Blockchain based cryptocurrency platforms offer a lot of improvements for business transactions. It is particularly beneficial for freelancers and contractors as the payment system is completely online and most freelancers and service providers also operate through the web.
A cryptocurrency like Calero allows setting up smart contracts. These contracts execute automatically when certain pre-set conditions are met. The automatic execution of contracts can help build trust and reliability for doing businesses online.
Another benefit of Blockchain based platforms like Calero is that it removes the need to rely on third parties. Crypto coins are kept in digital eWallet and can be quickly transferred from one party to another without requiring inter-bank communication.
The company allows the automatic generation of invoices which are further checked for errors by a verification process through an automated function. The chance of invoice errors generated through a digital process is significantly lower than manual invoices.
Perhaps one of the greatest advantages of Blockchain platforms like Calero is that they can be monitored openly by authorized personnel and can be accessed from anywhere. This makes it very easy to monitor and check the records for payments that have been cleared and the ones that are outstanding, improving overall communication.
Finally, a transaction platform built on automated contracts will give service providers a level of clarity. Freelancers and contractors will be able to calculate their receivables and income more accurately and manage the overall business cycles more efficiently.
One area of Calero aims to decrease the time taken for business documents to be created, sent by suppliers, then matched, approved and paid by the client all within one dashboard.
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