Getting paid - and getting paid on time - is one of the biggest headaches for any business. It takes time and resources better spent elsewhere to zero out every account. When payments are late, you’re serving as a de facto credit provider for your customers - at your detriment.
Cash flow issues are the reason 82% of small businesses fail. It’s a major issue and can be fatal.
It’s not realistic to expect all accounts to be in good standing, but you’d like to be as close as possible. It doesn’t have to be quite so difficult, however.
Want to increase your cash flow and reduce your stress? Follow these four tips to get your accounts paid faster.
Embrace Paperless Billing
Paper billing is still useful, but it shouldn’t be your only customer touchpoint. Adopt digital billing as a primary or secondary communications piece.
Paper statements are certainly useful for customer accounting departments and as an easy reminder to pay the invoice. It may very well be their preference. However, it’s difficult to justify the expense to send out multiple versions of a paper invoice during a billing period when email options are available.
Automate Billing Communications
Related to paperless billing, set up your bill-related communications to be sent automatically and at a regular cadence. Manually doing this costs time and money. Automating your reminders takes little administrative time, eliminates the need for a third-party (postal service), reduces your carbon footprint and costs less.
Provide a Self-Serve Payment Option
Make the payment process as easy as possible with a portal designed to give the customer everything they need to know about their account. Let them know their account details and make payments on their schedule. A customer-focused account portal will:
- Make paying easy - Make the process seamless and secure. You’ll be expected to accept standard payment options like credit cards and electronic fund transfers, but consider expanding to take options like Paypal, ACH or Venmo.
- Be clear - Customers should easily understand what they owe and when payment is due. Provide a line-item bill if necessary.
- Provide historical data - Past bills and orders should be easily accessible. Any tax-related information should be included as well.
Also provide historical data, like previous invoices and account statements.
Customers want more for less. So why not give it to them? Offer discounts for accounts that pay early or set up automatic payments. This will save you time and money in the long run and customers get your product or service for a reduced cost. Everybody wins.
It can even help increase sales. You’re providing a discount price as a new standard, provided they meet certain conditions.
This can take on several forms. Accountants may reflect this as something like a 1/10, net 30 invoice, where 1% is deducted if the payment is received in under 10 days versus the usual 30. Or it could be a 3/20 Net 60 ROG, where three percent is deducted if the account is resolved in 20 days versus 60 days, upon receipt of goods.
In more real world terms, incentives usually look like:
- A financial lender providing a 0.25% rate reduction on an auto loan set to autopay
- An insurance company that includes a $5 discount for every month the account is paid before the due date
- A supplier offers a 1% discount to accounts that are paid in full in 10 days versus the standard of 30
This is a reduction of your profit margin, so you’ll have to determine if the return on investment is sound. Having more cash on hand to handle day-to-day expenses may be worth it.