Our 4 top tips for getting paid on time by your customers
How to help ensure your business gets paid on time, every time
1. Maintain a clear audit trail & check for fraud upfront
Over 80% of credit managers are not checking for fraud according to the Veda National Credit Managers Survey 2016. The report has revealed some alarming findings about the status of credit management in Australian organisations.
The 2016 survey had a special focus on the prevalence of fraud and its management by respondents, due to the increasing sophistication of cyber threats.
“One of the most alarming findings in this year’s survey was that only one in five credit managers performed a fraud assessment in addition to a credit check and that 40 per cent of respondents were unable to determine whether overdue debt was due to fraud,” Veda’s general manager, commercial risk, Neil Shilbury said.
2. Automate the process
If you have clients who are supposed to pay the same amount every month, investigate the opportunity of automating the payment process. One way to help ensure timely payment is to have a direct debit authority. This may help to remove the human error of clients simply forgetting to pay. Alternatives include services such as Paypal and Stripe which can easily allow businesses to setup recurring payments, reminders and integrate well with cloud accounting services such as MYOB, Xero and Intuit.
3. Offer incentives to pay on time
Clients may respond positively to being offered a discount, or incentive to pay on time. Although you are effectively giving up part of the value of what you are owed, it might be less than the cost of waiting to be paid. The costs of paying staff to chase payment, sending overdue notices, and rearranging your own business finance may be less than the cost of the discount that you offer.
4. Finance the invoice – get paid within 48 hours
Unfortunately, some clients will still refuse to pay on time; this can have a negative impact on your cash flow. However, there are options available to overcome this hurdle and help your cash flow continue smoothly. One way to achieve this is to use invoice financing. Many accounts receivable financing companies can have the money transferred to your bank account within 24 to 48 hours depending on circumstances.
What does this cost?
A lender will simply offer to buy your invoice, or group of invoices, from you at slightly less than their face value.
So, let’s say you offer to sell an invoice worth $5,000. The lender might buy it for $4,750. The difference is the “invoice finance rate”.
What’s the value in doing this?
- You have immediate access to working capital.
- You eliminate the stress of being unable to pay your bills.
- You can buy equipment and inventory to meet urgent orders and grow your business.
- You can avoid offering discounts for prompt payment that may not work in your long term business interest.
- You don’t have to disclose the facility to the customer. Many of the facilities operate on a completely confidential basis.
- You don’t have to put your home or office up as security.
- You don’t have to sign a long term contract.
- You are in charge of the transaction as the facility can be turned off and on at the click of a button.
What kind of business does this type of facility suit?
- Trading with other businesses (B2B).
- Invoicing against completed service or milestones.
- Business can be start-up to maturity. The only exceptions are businesses that are involved in construction, maintenance services & permanent recruitment industry.
- No minimum turnover or tenure.
- Company directors reticent to provide to personal & commercial security.
- The business customers/debtors are considered to be medium to large businesses with greater than 10m turnover.
Got questions? Need assistance with managing your business cash-flow?
The team at Naritas are experts in delivering timely guidance & finance approvals. We have over 100 lenders on our panel & a high quality team of dedicated credit advisers to steer you efficiently through the approval process.