Three strategies to get paid faster
Australian small businesses are owed an average of $13,200 in late invoices. NAB’s Rebecca Warren and Intuit Asia Pacific Vice President & Managing Director Brad Paterson discuss strategies for improving cash flow.
Late invoices are a major problem for many small businesses – a recent report found that, on average, they’re owed $13,200. Rebecca Warren, NAB’s General Manager Equipment Finance, and Brad Paterson, Vice President & Managing Director of Intuit Asia Pacific, suggest ways to get paid more promptly.
Many Australian small businesses are buckling under the weight of unpaid invoices. A Late Payments Study commissioned recently by Intuit Australia and PayPal Australia found that, at any one time, they’re owed an average of $13,200 each and that their owners are wasting an average of 12 days a year on chasing money. The study also found that more than a quarter of small business owners are taking out loans to cover their expenses. Some even fall behind with their mortgage payments or cut back on buying groceries as they struggle to keep the business afloat.
“At the smaller end of the scale business and personal lives are often inextricably interlinked because the business has been funded against the mortgage,” says Rebecca Warren, NAB’s General Manager, Equipment Finance.
Many people who start a business lack accounting knowledge, so they may not think of the money they’re owed in terms of capital or equity in the business, or understand the benefits of managing their debtors more efficiently.
“Small business owners are extremely busy, but finding time to learn a bit about cash flow should be a priority,” says Warren. “You need to map the flows of money in and out of your business – how payments are received and made – before you can start looking for ways to improve your efficiency.”
Best use of technology
Setting terms is an important starting point, and that means walking the fine line between what’s optimal for your business and what customers are prepared to tolerate.
“There’s no point in insisting on payment on receipt of invoice if that’s going to drive good customers elsewhere,” says Warren.
It’s also important to consider whether you’re making the best use of available technology.
Online banking, BPAY®, direct debit and EFTPOS can all streamline the payment process. And, if you sell overseas, there are also solutions, technical platforms and products you can put in place to make and receive payments in multiple currencies.
“The process is much easier today than it was even two or three years ago,” says Warren.
Communications such as video conferencing and email make it much easier to stay in touch, and technology can also help you to sound out potential customers.
“If you Google feedback from their other clients, you’ll soon see if they have a poor payment record,” says Warren.
Practical tips for getting paid faster
Brad Paterson, Vice President & Managing Director, Intuit Asia-Pacific, believes these three simple strategies can make a positive difference to your cash flow.
- Get mobile
“Many of our customers are on the road for at least half the day, driving from meeting to meeting,” he says. “The savvy ones have moved to the cloud and use accounting software on a mobile device, so they always have insights into their cash flow. They can then use this to run their business more efficiently. For example, a customer with a bakery in Melbourne refers to QuickBooks Online before visiting her own customers to see whether they have outstanding invoices. This helps her to frame the conversation.”
- Get advice
“There’s nothing scarier than looking at your figures and not quite knowing what they mean or what you should do next,” says Paterson. “I come from a family of small business owners and still run a small business of my own, so I’m familiar with that pain. A professional adviser can help you to make decisions and develop strategies that will optimise cash flow and make the business more resilient. You can then focus on what you do best rather than waste your time worrying about your finances.”
- Make it easy
“Most of your customers are likely to be other small businesses and we know that 85 per cent of them run their business on a mobile device,” says Paterson. “It makes sense to make their life easier by sending an invoice they can open on their phone or tablet. And, if your invoice also has a ‘pay now’ button so they can pay it with one click, you’re far more likely to get paid promptly than if they have to go down another channel.”
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