Three things that you can do today to help you get paid faster tomorrow
It is one of the biggest challenges of Small Business: getting paid on time for the work that you’ve completed. You understand the importance of cash flow to pay your bills, ensure your staff are paid and to, overall, maintain a healthy business. You also understand that there can be many reasons why clients and customers drag their feet when it comes to making payment. These friction points can include forgetfulness, lost emails or having your invoice slammed into the to-do later pile (we get it, people are busy, but we also understand that you need to get paid). A healthy cash flow relies on a few key components including management, budgeting and funds coming in. In this article, we will focus on the last point and look at three ways that you can cut the friction to make it easier for people to pay you. Implementing the below points today, in turn, will go towards you getting paid faster tomorrow.
Make it Easy with Technology
Earlier this year, Xero announced their partnership with payment platform, Stripe. With this partnership, payment of invoices sent via Xero got much easier with the addition of an online payment services attached within the invoice itself. Alongside convenience (goodbye too hard basket), Stripe also provides the option to save card details and collect reoccurring payments to help reduce debt collecting on the average 1.6 million repeating invoices sent each month.
Since this announcement was realised in June this year, we’ve investigated if creating less friction to make a payment with technology does result in a faster payment turnaround time and a healthier cash flow.
In June 2019, the average of numbers of days for an Australian Small Business 30-day term invoice to be paid was 35.65 days. Three months later, this number had reduced to 32.99 days, which aslo sat below the trend line for this statistic, which is a big win for the business owners this is affecting.
Over the same period, 50.49% of Australian Small Businesses were cash flow positive. By September, this number had increased to 54.08%. Again, this last figure has hovered above the trend line as well.
Essentially, these statistics tracked by Xero are tracking in a way that shows that reducing the friction of payment and making it easier for your clients or customers to do so results in both a faster payment time and could result in your business being in the increasing percentage of cash flow positive Australian Small Businesses.
Stay Front of Mind
Staying front of mind to get paid is a must to ensure that your invoice gets paid in a timely manner. If you’re not a fan of debtor chasing, try to view it as reminding rather than nagging. After all, you’re simply asking for payment for a service or product that you’ve generally already supplied.
Having regular communication touch points with the people that have invoices is the best way to do this. Vary the communication type by touching base with both phone calls and emails and remember to send a follow up email if you reach them via phone (for a paper trail and to be an inbox reminder).
We find it best to touch base a few days before (by email), on the payment date (by email) and once payment is overdue at regular intervals being 3 days, 7 days, 10 days, etc. (by phone and emails). You can also automate or outsource this process with programs or an agency that will communicate with your debtors for you.
Regardless of how you communicate you are ensuring that you stay front of mind and on top of your clients and customer’s inboxes, reducing friction by making your invoice easy to find. This will, in turn, give your invoice the best chance possible to being paid quickly.
Change the way you get paid
If you’re finding that chasing your debtors is eating up a lot of your time and resources, it may be time to reduce your friction and switch up how you get paid. Instead of chasing debtors, you may want to change your payment model to collect full or part payment upfront.
One way in which you can think about this payment model is to look at it like a deposit for your services. If you do decide to collect a part payment, you will still need to have a debtor chasing process in place to ensure that the remaining portion of your payment is collected. If you’re opting for a full payment upfront model, you will also require a reminder process to get invoices paid before work is started. If you chose to adopt an upfront payment model the result is security because you won’t be completing jobs that you aren’t getting paid for and liquidity for incurred expenses, which will help to keep your cash flow healthy.
Find out more
Interested in getting paid faster with a Stripe integration, tightening up your debtor process or switching up your payment method? Contact our team HERE to find out how to reduce friction around getting paid and how we can help you make it count.