Cash flow is integral to the expansion of every business, particularly for the small to medium-sized companies in the competitive B2B space. It provides capital needed to hire talented staff, purchase modern equipment, or amplify marketing endeavors. Withheld funds compromise a company’s ability to maintain a healthy cash flow. This occurs when a financial institution or payment processor releases a portion of a payment into a seller’s account and withholds the remainder of it temporarily.
Running a B2B company is challenging enough without held funds suppressing growth.
However, there may be a way to prevent it.
Causes of held funds
There is typically no malicious intent when banks and payment processing companies hold funds. On the contrary, it can be considered a safety precaution to safeguard a business from potential fraud, chargebacks, or other financial risks.
Large payments are typically put on hold because financial institutions want to ensure the funds in the payer’s account can cover the transaction or if there isn’t enough information on the buyer’s payment history.
How Held Funds Hurt a B2B Company
Imagine trying to drive a car on an empty gas tank or power your home without any electricity. Those are the equivalent of trying to run a B2B company when revenue is frozen, or you only get paid a fraction of what you were expecting.
Held funds make it difficult for companies to pay their expenses, which leads to late payments that damage their credit and brand reputation. It’s also hard to budget for future purchases and expansion if you can’t accurately predict how much cash is coming in or when.
Sometimes, held funds can damage the relationship between the seller and the buyer, especially if they lead to the buyer’s full payment coming in past due. This can create misunderstandings and disputes that may ultimately cost the seller a customer or future customers if the buyer tells others of the unpleasant experience.
Greatly Reduce Held Funds with Bill360
Bill360 was created to help B2B companies like yours achieve long-term success and profitability. Our innovative accounting automation software streamlines your accounts receivable process and enables you to get paid faster, reduce Days Sales Outstanding (DSO), and invigorate cash flow.
Along with providing innovative accounting automation software you won’t find anywhere else, Bill360 reduces and practically eliminates held funds. That way, you get paid in full, giving you access to the cash you need when you need it.
Maximize cash flow by trying Bill360 free for 30 days. After your trial is up, Bill360 is yours for just $10 a month.
