Late payments have become so ingrained in Australian business culture that small to medium-sized businesses (SMEs) seem to accept them as a permanent challenge of the job.
53% of all invoices in Australia are paid late. The impact of COVID-19 has worsened these delays and a study from Xero shows the average payment time to small businesses increased from 25.5 to 26.5 days between February and May. That waiting time has likely increased due to the return of restrictions across parts of Australia.
It’s snowballed to the point where the Australian Small Business Ombudsmen, Kate Carnell, is now calling for a mandatory, regulated maximum payment time that forces larger businesses to pay SMEs within 30 days.
There are many digital tools SMEs can implement to prevent late payments and improve their cash flow. Not only can these improve the odds that the money owed arrives accurately and on time, but it also makes life easier for customers to transact with businesses and improves their shopping experiences.
Here are four simple tips for preventing late payments:
1. Send Invoices Immediately
Running a small business can be an arduous and busy task. As your customer base builds up, it can be difficult to keep track of their invoices if they need to be located through copious amounts of paperwork, spreadsheets or PDFs. You may even forget to send the invoice in the first place or chase a client for payment on a bill you never sent, which can hurt your business reputation.
Modernised payment collection systems can send all invoices out in real-time to customers under a secure PCI compliant portal. Not only can they view, track and batch-pay all incoming invoices in seconds, but prompt invoicing forms ideal customer-supplier relationships and encourages further business opportunities by keeping customers informed on due dates and enables more flexibility in payment negotiations.
2. Ensure Clear Payment Terms
Your payment terms need to be as simplified and easy to understand. Being clear on the consequences of late payments promotes the diligence of customers to follow your trading terms.
Avoiding ambiguous notices such as ‘Due in two weeks time’ on invoices and replacing them with a clear payment due date will be more effective. If you are using software that provides real-time updates showing a daily countdown it can help keep your outstanding invoice at the forefront of your customer’s mind. Notifications can reduce the odds of having to impose penalties on customers in the form of fines or reduced credit terms.
The SpendaCollect platform has a clear and interactive dashboard that notifies customers of all their outstanding invoices, grouping them into those “due soon” or “overdue.” The platform also offers your customers more payment options and allows for batch-payments, making it quick and easy for customers to group invoices and pay them off in one transaction.
Additionally, SpendaCollect integrates from your ERP system through SpendaCollect and into your customer’s small business account software, so both parties are operating on a single source of truth.
3. Make Payments Easier & Faster
If your business is inadvertently making it difficult for customers to pay, you’ll find it harder to get paid. 85-90 percent of all Australian SMEs still manage their invoices with paperwork and send invoices out via mail, spreadsheets or PDFs.
Getting paid on time is a two-way street. Providing your customers with a simple way to view and pay outstanding invoices and enter into payment terms if needed will improve your business’s efficiency to collect debt.
It’s a win-win for both parties. Customers can keep track of everything they owe and make payments seamlessly and rapidly with admin and double data entry significantly reduced, while that awkward email or phone call demanding payments can be history.
A digital system provides accurate payment visibility and far more robust credit control between your business and your customers, making it easier to identify and plug any potential cash flow leaks.
4. Be Flexible
Before getting annoyed at an overdue payment, try to empathise with the customers’ situation to cultivate a better relationship. Is this the first time they’ve paid late? Are they under financial pressure?
Not only does SpendaCollect provide concise communication between your business and your customers, but it also offers more payment options to customers. You are allowing them more ways to pay you in a way that works for their business.
Want to allow more manageable payments for customers and prevent late and inaccurate payments to your business? Call 1300 682 521 or contact us to discover more about SpendaCollect.