Making sure you get paid on time is critical to your business’s cash flow. Not only is adequate cash flow important in paying your operating expenses, but understanding your average payment times and where and how this can be improved will allow you to better plan investments in your business. There are several reasons your payment times may not be where you want them to be, but that doesn’t mean you can’t turn things around.
In this article, we provide a few tips to help you get paid faster, including thinking about the customer’s payment experience, which is often a common impediment to a business’s cash flow.
Why don’t customers pay their invoices on time?
When it comes to identifying why customers don’t pay their invoices on time, it’s important to consider the payment process from their point of view. You may be frustrated that, again, a customer hasn’t paid their invoice on time, but have you asked what the process looks like for that customer to settle their account? Think about the last time you had to pay an invoice, and the process felt difficult. The payment details may have been unclear, or you may have had to process several invoices for one creditor or suppliers over individual transactions — not exactly the makings of efficient business processes.
How much time are you spending on chasing up debtors?
According to Prushka’s 2020 Canary in the Coal Mine report, 64 per cent of businesses spend, on average, less than five hour per week following up debtors. While this is an improvement, up by around 20 per cent over the last 18 months, just under half of the businesses surveyed (47 per cent), said that it’s becoming harder to collect outstanding debt. Similarly, 53 per cent of debtors surveyed for the report said it’s harder to pay debt than a year ago. The economic impacts of COVID-19 may have exacerbated this difficulty; however, there are still things businesses can do to get paid faster.
Common friction points in B2B payments
Innovation in B2C payments has developed significantly in recent years, while B2B payments are still often fraught with friction. Some of the common reasons customers fail to pay their invoices on time include:
- Incorrect customer contact details on the invoice
- Outdated accounting systems and processes
- Poor processing systems resulting in lost invoices
- A lack of integration, enabling multiple invoices to be paid at once
- High processing costs deterring customers from card payments
- Slow clearing times
Looking at what your business can change to get paid faster is a critical step in taking back control of payment times and processes in your business.
How your business can get paid faster
There are a few things you can do to help your business get paid faster. From incentivising customers for early payments to being clear with your payment details on your invoices, you need to think about the customer’s payment experience while strengthening your payment systems and processes.
Some changes you can implement to strengthen payment systems and processes, include:
- Making payment details and terms clear on all invoices and communications.
- Digitise your invoicing process, so all invoices are tracked, and reminders can be automated.
- Implementing a system such as SpendaCollect, which enables businesses to collect debt from any customer.
- Following up debtors as soon as an invoice is overdue.
- Using a platform such as Spenda that allows customers to pay several invoices at once.
- Offer incentives for customers who pay early, such as a discount on the invoice or future purchases.
The key factor that will bring together all the improvements you’re making across your business is a system that integrates all of the digital transformations in your business, particularly when it comes to payments.
Improve your payment systems, improve your cash flow
While making changes such as ensuring your invoices clearly state payment details and terms for your customers can help remove ambiguity, your business needs strong digital frameworks behind all these processes.
Spenda’s platform includes a range of products that help businesses to ensure all of their accounting and finance platforms have a single point of truth. Not only does this reduce errors due to poor data, but it helps businesses get paid faster by providing customers with a range of payment options.
Contact us to learn more about how you can integrate the right tools and processes in your business so you can get paid faster.