As anyone close to billing can tell you, invoicing and collections are not the same thing. Especially in enterprise SaaS, where the time between sending a customer invoice and collecting cash can be upwards of 3 months.
Even for companies relying on credit card payments, according to Chargebee, the first charge fails nearly 6% of the time.
To account for these challenging realities, the simulator inside Summit now collects cash at an offset from invoicing, depending on the size of the transaction. For non-credit card transactions, while NET 30 (cash collected thirty days after invoice) is the most common, Summit uses a normal distribution to simulate delays (aging) of up to 6 months.
For credit card payments, payment terms are assumed to be NET 0 (pay immediately); however, Summit will now simulate the failure (and need to retry these charges) up to 5.95% of the time.
These changes provide users of Summit with a more realistic stress-testing of cashflow.
Here is a cash balance forecast for an enterprise SaaS before these payment terms are incorporated. We are showing 5 forecasts to illustrate a range of possible futures:
And here is a forecast for the same business, with realistic payment terms:
Users will see the effects of this change the next time they generate their baseline forecast or growth plans.