3 simple steps to get paid on time.
Getting paid on time is a certainty for people working in so-called 9 to 5 jobs but when it comes to sole traders, suppliers and small to medium businesses, getting paid on time is rare. Just ask any business owners. The lag time on the traditional invoice trail has expanded from the once due in 7 days to “maybe sometime in the near future”. Australians do not have a good reputation on this front and it shows in the number of business failures who could not maintain a healthy cash flow due to the late invoice payments (check out our article on 31 May - Why paying your bills late is costing you more than you think)
It became so bad that even the government took notice and put into play specific laws to make sure that SMBs are paid according to specific guidelines and timelines, to prevent further collapses. Now it’s trickling down to corporate enterprises to follow through on similar guidelines.
So why does this matter to you? Well for one thing, large corporations and other industries work at a snail's pace when it comes to following the government’s lead and payment innovation. This means you need to proactively figure out the best ways to get paid on time and if you are creative enough, get paid early. Despite the change occurring with large corporations, the reality is your business actually transact mostly with other SMBs and not large corporations and hence cannot rely on these government changes to solve the late payment issue.
There are 3 pro-active steps a business can take. The first is to set the standards and undertake a level of due diligence. Start by putting your payment policy in writing, with clear timelines and payment terms communicated to your customers, so that your expectations are understood. Once these guidelines are established and you understand your customers and their payment processes, run some credit checks to make sure they are not a known risk. The second step is to review and automate your invoicing, payment and reminder processes. Set up your invoice templates to reflect the standards you established and add to that, the ability to accept multiple online payment options either via one-time-payment or a portal for your customers to pre-load and schedule payments. The final step which until recently was hard to implement, is to introduce and automate early payment discounts into your payment processes.
Look for software that can help you in real time, calculate early payment discounts into your invoice so your customers are incentivised to pay early in exchange for a discount. You can also explore the shift away from product discount to early payment discount <insert article 2> so customers are rewarded at the end of the transaction. Once these processes become business as usual, you can easily manage exceptions, late payments and debt recovery to stay on top of your receivables. If this process is automated, as can be done with today’s payment software, you can step back and do as the experts say and work on your business and not in your business.
You deserve to get paid on time, so make sure you do.