One of the most common problems local businesses face is collecting payments for the services they have offered. Adopting well-established methods can help make the process less challenging, and reduce future collection issues.
The Value of Getting Paid on Time
Local businesses benefit from timely payments in a number of ways.
First off, forecasting cash flow is vital for local businesses if they want to avoid future financial problems and ensure they're always in a healthy cash flow position, regardless of their business’ seasonality or ups and downs. You can read more about managing cash flow as a local business owner in our last blog post.
Timely payments make creating an accurate and successful forecast much simpler. This is because of the certainty around how much money will be going out and how much money will be coming in at any given time.
Why Do Businesses Struggle to Get Paid on Time?
Late payment collection can cause cash flow issues for any organisation, but it can have a particularly negative impact on small sized businesses because of their lack of cash reserves.
Unfortunately, it is common for local businesses to struggle with on time payments from their customers. There are a few reasons why this might be:
Customers often use late payments to safeguard their own liquidity and cash flow. This, coupled with suppliers asking for for early payment of their invoices, creates a vicious circle that interferes with cash flow health.
Local businesses often don’t have a sophisticated invoicing system in place. This results in the risk of failing to send invoices for finished work, forgoing the payment for the services provided. Similarly, the lack of a proper invoicing software in place increases the chance of missing payments going unnoticed, and never chased.
Local business owners might find it awkward to nudge their customers for late payments, fearing they might compromise the relationship they have worked hard to create and nurture.
Tips to Maximise the Chances of Getting Paid on Time
Even though late payments can become normality for some businesses, the problems and issues they can cause should not be underestimated. The good news is that business owners do have options to tackle the common but painful matter of late payments.
Invoice Management Systems
As we have seen, one of the key reasons why late (or missed) payments can go unnoticed is the use of rudimentary invoicing systems. Digital tools for invoice generation and processing are now widely available, often affordable and straightforward to set up.
Here are a few of the benefits related to the use of a more sophisticated invoice management platform are:
Automating the creation of invoices once work has been completed reduce the chances of forgetting to invoice customers for the services they have received.
Automatic reminders for customers as their payment due date approaches increase the likelihood that those payments will eventually be completed on time, while sparing business owners those awkward phone calls to chase their customers.
All payment terms and conditions, including late payment penalties, can be automatically stated in writing on all contracts and invoices, which makes it easier for the business to take action in case of late or missed payments.
Simplify the Payment Process
Another way to increase the odds of timely payments by customers is simplifying the payment process as much as possible.
The ability to send payment links via email, SMS or WhatsApp, which should make the process easy and painless for the customer, is an example of how technology is revolutionising the payments space making it easier and easier for customers to complete transactions while on the go.
Moreover, the introduction of open banking infrastructures enables customers to pay with the tap of a button, as they are redirected to their bank’s mobile app, rather than having to input their credit card details or the bank account information of the business. At the same time, open banking guarantees instant settlement of funds into the recipient’s account, and lower fees compared to more standard payment methods such as credit card machines - both of which are invaluable benefits especially for businesses of small size.
If you’re looking for more efficient ways to collect your customer payments, Fuzey can help! With Fuzey, you can simplify your customers’ payment process and minimise the risk of late payments.
Send invoices and collect payments with ease, directly through your Fuzey inbox.
Allow customers to pay by card or instantly from their bank with the tap of a button.
Minimise the time it takes for funds to reach your account as well as the payment fees applied.