Forecasting, reducing your outgoings, predicting your orders, and leveraging technology. These are just some of the many proven ways to improve your cash flow. But there is one more strategy that new business owners often overlook and it's all to do with how and when your customers pay you.
Several studies show that delayed payments are amongst the most common causes of poor cash flow. And it's no surprise really - with money coming in late, it will be hard for you to replenish your inventory, pay your rent or your staff’s salaries, and keep your day-to-day operations running. The way to solve this though is to make sure you get paid on time, every time.
How is that even possible you may ask? Well one easy step is to allow your customers to pay you online. By doing so you will receive your money faster, which directly improves your business’ cash flow position.
Online payments are the preferred payment method for most customers as it enables them to settle their invoices quickly and without any hassle. In Australia alone, more than 41 million debit cards and 16 million credit cards were used to pay online purchases, invoices, and other business to business payments.
Also, the Reserve Bank’s 2016 Consumer Payments Survey - which studied Australians payment trends - revealed that there is a continued shift away from paper-based payment systems to electronic means of payment, including cards and third party processors like PayPal.
In a similar report from Westpac, it was unveiled that 53% of payments made in Australia are done digitally, through mobile payment applications and cards. A staggering 83% of people even believed that businesses who don’t offer a digital option for payment will likely be left behind.
If being left behind is not an option (and we'd suggest it isn't) then starting to allow your customers to pay you online is a logical future-proofing step. Here are the many ways you can do it:
MAKING USE OF PAYMENT GATEWAYS
Integrating a payment gateway into your website is one of the simplest ways to get paid online. These systems work with banks and top credit card processors allowing your customers to pay their invoices using their preferred credit card or debit card. What’s great with online payment gateways is they’re easy to set up and some can even be customized to fit your branding.
Some of the major payment gateways here in Australia are PayPal and SecurePay. SecurePay is common with e-commerce stores and retail companies who want to accept customer payments directly on their websites. It lets you take credit card payments and even mobile payments. Other payment gateways that are widely used are Fat Zebra, eWay, NAB Transact, and Braintree, which is ideal for businesses who want to accept online and mobile payments from other countries outside Australia.
ACCEPTING DIRECT DEBIT PAYMENTS
Direct debit is certainly the most convenient way to take payments online. Whilst it can take a bit of work up front due to the processes and rules you need to comply with, rest assured that it will make it easier and faster for your customers to pay you. Once you've been authorized by your clients to take money directly from their accounts, the money will be deposited in to your account instantly.
This particular payment method is being used by businesses who take recurring and automated payments. In Australia, it’s believed that around ⅓ of all non-cash payments are direct debits and this kind of method is growing by 10% each year.
UTILISING MOBILE PAYMENTS APPS
Another effective way you can accept online payments is through leveraging mobile payment apps. This method lets people send payments anytime and anywhere using the device that they use the most: their smartphones.
In Westpac's Cash Free Report, it was revealed that the use of mobile-based tap-and-pay systems has increased by over 200% in the last 12 months. It also found out that 4 out of 5 Australian smartphone users think that paying via their handheld devices will eventually become the norm. If you want to be ahead of the curve there are several mobile payments apps you could use:
LEVERAGING AN ACCOUNTING SOFTWARE
Believe it or not, adopting a good accounting program can also help you take online payments. Xero, for instance, allows you to accept payments straight from your electronic invoices. The accounting tool has the ability to generate accurate invoices and email them instantly to customers. When your customer views it, they can use the “Pay Now” button to pay you using the payment service you have selected.
Accounting software provider MYOB also offers the same feature. Its newest PayDirect Online enables customers to pay online straight from the invoice that you have sent them. According to the provider, their latest innovation will save hours of admin work and will help address delayed payments.
“Australian businesses currently on average wait 44 days to get paid, and our research continues to tell us that cashflow is a significant concern for businesses,” says James Scollay, General Manager of SME Solutions, MYOB. “We’re working to reduce this time, and address SME pressure points of cashflow and uncertainty in finances. Through PayDirect Online, SMEs will get paid faster, and can gain better control of their sales with online invoices. They can track invoices in real-time, and access those customers that require a follow up.”
ADOPTING AN ORDERING AND PAYMENTS APP
Aside from having a good accounting system, adding an ordering and payments app to your back office will also allow you to take payments online. What’s more it provides your customers with the utmost convenience - they can place their orders and payments straight through the app at the time and place that suits them.
There are currently lots of ordering and payments apps available for consumers, but if you're looking for one that’s specially tailored for a food and beverage business like yours, then check out Ordermentum. Boasting a number of excellent features it will not only cut down the time you spend in chasing late payments, but will also help you improve your cash flow.
1. It has an instant payment solution that charges your customers automatically through credit card or direct debit.
2. It can generate a report of whose payments are overdue so you can contact these customers straight away instead of waiting for them to pay.
3. It has a “Charge Now” button that re-processes the payments of those customers who still haven’t paid.
4. It can accept credit card, direct debit, and mobile payments, giving your customers more hassle-free ways to pay you.
5. It allows you to set flexible terms (upfront, 30 days, or any date you choose). You can even tailor the terms to each customer. You just have to choose the due date - for instance, 7 days after delivery - then their card will already be charged automatically on that date.
6. It automates invoicing. After receiving the orders from your customers, they will automatically receive electronic invoices that are clear and accurate. This cuts down your paperwork and eliminates the errors you get when manually creating and sending an invoice.
If you want to know more about Ordermentum and how it can help you take online payments, request for a demo here.
Accepting payments online will help you get paid faster. Remember that your customers are busy people, too, so you need to make paying as easy as possible for them. The easier it is for them, the more likely they are to pay you on time and the more likely you are to be cash flow positive.
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