SME’s can often be blighted by late invoice payments, ultimately snowballing into cashflow issues and disrupting operations. This isn’t a new phenomenon, but we have definitely seen a trend in recent years of this becoming more common in business.
You can’t change the instances where late payments are purely down to customer behaviour, but there are some quick wins where a change in tech and strategy can help bridge the gap with your debtors. Head of Digital Advisory, Ryan Alderson, looks at these quick wins in more details in this month’s Fintech Friday.
Maximise your Xero
Although my role revolves around the wider App community, I’m a huge advocate of making sure you maximise the capabilities of your core accounting software as a start point.
Within Xero, there are a number of built-in features to kick start your Credit Control. Here are a few of my favourites:
- Send the Invoices Direct – Using the email function from Xero isn’t just a workflow time-saver, but also allows you to track when your invoices are viewed by your customers.
- Automated Follow-ups – Create pre-set follow-ups to your Sales Invoices, even if it’s just a polite nudge on the invoice due date. This creates an additional touchpoint with your customer, prompting to pay.
- Send Statements – People need reminders of where their account is, and there’s no better way than sending bulk statements directly from Xero. Again, it’s all about creating touchpoints.
- Credit Limits – This moves away from the chasing element and more towards proactively managing your limits. Xero can be set to simply give warnings when credit limits are passed for a client, or the invoice can be blocked if the limit is breached. This function is especially helpful if you have a number of people raising Sales Invoices with no direct involvement in your Credit Control.
Keep on top of your housekeeping
Whilst this is only loosely related to tech, I wanted to flag two additional areas which businesses must look at and which can often be overlooked in the operation:
- Be reasonable with Due Dates – I’d love to sit here and tell you that everyone should have 7-day payment terms, but in most industries this is unfeasible – often leading to your customer ignoring the due date and simply paying whenever fits their schedule. Consider your payment terms (potentially even on a client-by-client basis) and set them within your software accordingly.
- Declutter your Sales Invoices – I see it all the time where Sales Invoices are cluttered with excessive non-financial information or over the top branding. At the point of a Sales Invoice, the customer wants the key financial and legal information as well as details of how they can pay. Have someone new read an example of your Sales Invoice template, and ask them how easy it is to grab the key information.
Offer Multiple Payment Options
People want convenience – both in their personal life and in business.
Including your business bank details at the bottom of your invoice was the norm for a long time but, in an era where we are reliant on instant online checkouts and Apple/Google Pay links, that approach is viewed as quite antiquated .
Having just your Bank Details within your invoice is fine, and you’ll get paid eventually, but by embracing digital payment solutions you make it easier to get paid.
What is a digital payment solution?
Introducing iwocaPay
This month, Harold Sharp made the switch to using iwocaPay as our digital payment solution, superseding a household name in this field. It integrates directly with Xero and is as simple as selecting an invoice branding theme.
Honestly, it’s been a revelation.
iwocaPay excels in simplifying the checkout experience for our clients. It limits the number of clicks, and subsequently friction, in the payment process and increases the likelihood of timely payments. iwocaPay is optimised for mobile use, so our clients can pay on the go. Already, we’re seeing instances of invoices being viewed and paid within minutes of each other.
If we compare that to the process of Harold Sharp simply noting its business bank details – you get the invoice, you log in to your banking portal with either a dongle or biometrics, you copy the bank details from the invoice, you make the payment via BAC’s. It’s extra steps for the sake of it.
Simplify the checkout process and see the benefits in your cashflow.
On top of this, iwocaPay can offer credit to your customers to pay in 3 or 12 months (albeit you receive the money instantly!) – more information can be found here.
Conclusion
The above options not only streamline your payment processes, but also reduce the administrative burden associated with managing late payments. The aim here is to save you valuable time and resources, allowing you to focus on growing your business instead of chasing overdue invoices.
Late payments add up, and can significantly impact the financial health of your business. By leveraging technology such as fully utilising Xero and tightening your checkout with iwocaPay, you can alleviate at least some of the stress and reduce your exposure to late payments.
How can we help?
If your business could benefit from speedier payments then contact our digital advisory team by emailing fintech@haroldsharp.co.uk, call 0161 905 1616 or contact Ryan below.
Ryan Alderson, Head of Digital Advisory
T: 0161 905 1616
DD: 0161 926 0512
E: ra@haroldsharp.co.uk