Improving small business cashflow through online payment services
Improving how quickly you receive payments from your customers is one of the fastest ways to improve cash flow and reduce the stress of running a small business. As an accounting firm that specialises in small businesses, we can help you improve cash flow through better invoicing and debt collection practices.
Going paperless and online payments
If you're still sending invoices by mail, you can instantly improve cashflow by electronically sending your invoices. Doing this will speed up delivery time by days. It also ensures that your invoice is going directly to the right person. If you’re already using Xero, you know the benefits of electronic invoicing and online payment services.
Adding payment services to your Xero invoices means your customers can make an immediate payment with just a few clicks. All you need to do is email an invoice from Xero to your customer. They can then view the invoice online and hit the ‘pay now’ button to pay the amount owing.
The sooner you invoice, the sooner you will get paid
Invoicing should be done as soon as you complete the related work. Customers are more likely to pay for something that they have just received, when it is fresh in their mind and they can see the value of your work. The sooner you send invoices to your customers, the sooner your invoice will be included in their bill cycle. A delay in sending an invoice might mean that you fall into a subsequent bill cycle.
Check invoices twice, send once
Sometimes we may be too hasty to send invoices and we don’t take the time to check the details are correct. By taking a little time to review your invoices (before sending them), you can improve payment and remove the frustration at both ends of the transaction.
Be flexible, when its necessary
Ensure your payment terms are clear to your customers from the start so that they know your expectations but be flexible when customers need to negotiate for more time/a payment plan. Sometimes your customers experience their own cash flow problems and negotiating temporary payment terms may be a great way to build trust, retain repeat business and keep cash flowing.
Incentivise early an option
Power companies have used this model for years. They provide discounts for on-time payments. This may be something you want to consider if you're having ongoing problems with late payments from multiple clients. If you’re experiencing your own cash flow problems, you may even offer a discount incentive for early payment.
On the flip side, you may want to introduce late payment penalties for customers that frequently pay late. However, you first need to consider your legal obligations and what impact late penalties may have on customer relationships. If you’d like more advice on this, talk to us.
Stay on top of payments
As they say, ‘the squeaky wheel gets the most oil’. In other words, if customers know that you’re going to contact them when an invoice is overdue, then there’s a good chance you will be moved up the payment queue.
Sending statements, setting up regular reminders and making phones calls will let your customers know that you expect prompt payment. Being proactive and persistent is key to successful debt collection.
Understand the most convenient payment methods for customers
When you have multiple payment methods that are simple and convenient for your clients you will find your cash flow will improve. It is about making it easy for your customers to pay you.
If you’re a Xero user, you can utilise payment solutions like Stripe and GoCardless. These solutions are designed to integrate seamlessly with Xero.
Stripe enables customers to pay with ease using their credit card, plus all Stripe transactions will automatically be matched in your Xero bank reconciliation.
GoCardless is your online direct debit solution and is ideal for recurring payments. Just like Stripe, GoCardless enables automatic reconciling in Xero.
Set up online payment solutions with Xero
Many other online payment solutions integrate with Xero. To find out what’s right for your business and your customers, contact Bizally today. We can also help you put in place processes to manage debtors and improve your cashflow.