No one likes late payments, especially small business owners. Here, Luke Hally from DragonBill shares his tips on how SBOs can get paid on time, every time.
The Small Business and Family Enterprise Ombudsman has recently released their Late Payments Report. It was great to see they went beyond the narrow terms of reference and had some interesting recommendations.
I think this is fantastic as late payments are a major problem for small business. Australian small business is collectively owed $28 billion – that’s around $13,000 each. Each year, on average, small business spend 183 hours chasing overdue invoices and 113 weeks creating invoices and receipts. That’s a waste of 7.4 weeks a year, you could be on holidays or earning more cash!
With this focus on late payments and fintech (financial technology) making the SmartCompany Top Four Trends to Watch in 2017, I thought I’d share a fintech-powered my top five tips to get paid on time (an update on my SmartCompany article from last year).
Payment upfront is the ideal situation for any small business. There’s one small problem though – not many customers like it. An alternative is an escrow. Escrow is when payment is made up front but is held by an independent party until the job is done. Traditionally complex, escrow is becoming more common and accessible with the rise of fintech startups.
Offer payment choices
The more choices your customers have and the easier it is to pay. The easier it is to pay, the more likely you will get paid on time. You probably already accept cash and manual direct deposit. Adding credit card, debit card or EFTPOS can really level the playing field with the big boys. We’re also seeing a growing trend in tech assisted direct deposit as an alternative to cards.
Use the Cloud
Spreadsheets work to an extent, but unless you are a whiz at macros or VBscript, they are probably letting you down. Cloud-based accounting or cash flow management software can do a better job at helping you keep track of your cashflow. Best part? You can do it anywhere.
Stick to your terms
Make sure you stick to your terms! If you don’t respect your own terms, why should your customers? If your terms are 14 days and you haven’t been paid at the end of day 14, call them. If they are have left the office, leave a polite message and follow up the next day. If they can’t pay immediately, get a date that they will pay. Remember, it’s the squeaky wheel gets the oil.
But who has the time to send reminders for overdue invoices? And who has time to write receipts when you have finished a job? Aren’t computers here to do the work for us? It has been a while coming, but we are gradually seeing automation tools make their way into the hands of small business and sole traders
These tips will help improve your cash flow, and DragonBill has features to implement them. We have a handy calculator to work out the cost of getting paid in your business, check it out, you’ll be surprised.
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