6 Ways to Improve Your Business's Payment Terms: Our Guide
Over the past year, SMEs have been struggling with getting payments from their customers. Unfortunately, things have gotten worse during the global pandemic that showed more companies struggling to receive payments within 30 days. One of the reasons behind this is that large companies now have more excuses to delay their payments, especially if they’re trying to support their clients during this difficult time.
Yet, if you want to improve your payment terms and policies so that you will get you paid on time, here are six practical methods to consider:
1. Get Client Approval
When you have delivered the work or the product, have your client sign off and approve it as soon as possible. By doing so, you can issue invoices right away, and this will let you collect a payment within 14 days. Suppose you have trouble sorting through paperwork to get those invoices out. In that case, you can use available online apps to collect necessary proof before and after services or products delivered to accelerate the payment process.
2. Implement A 14-Day Payment Term
With a 14-day payment term, it will let you use payments you get from customers to pay for the salaries of your staff within one pay cycle. For this reason, if you are currently still using a 30-day payment term, it’s best to switch to 14 days instead. A 30-day term means you need to find two weeks’ worth of cash to pay for salaries. Furthermore, your customers will likely understand the new payment terms because you also need to ensure your staff is paid on time.
3. Take Advantage Of Digital Payment Gateways
Integrate your invoices with digital payment gateways to make it easier for your customers to pay. Since most customers use their mobile phones these days, digital payment gateways will increase the chances of getting your payment on time because it can be done in a few clicks. Compared to bank merchant facilities for credit card payments, some digital payment gateways are cheaper as well.
4. Implement Direct Debit
Direct debit has become more popular in recent years, but you should only use this option for clients who are struggling. Direct debit will help improve your customer engagement because they will appreciate the chance to save and pay you when they can, which is crucial during this global pandemic.
5. Know Your Rights And Obligations
You need to know your rights and obligations if you reach a point when you need to take legal action. However, make sure not to resort to any legal threats to get your payment. When you know your rights and obligations, you get to handle late payments with ease.
If this aspect of your business is foreign to you, you can always work with our small business accountant in the Gold Coast to help you make well-informed decisions!
6. Do Your Due Diligence
Remember that many things can go wrong when it comes to your cash flow and finances. For this reason, you need to practice due diligence when preparing your budget and financial plan. Have someone on your team to cross-check documents, or the best way would be to outsource the task to a business accountant who has more knowledge and experience.
At this point, you now know six practical ways to improve your business’s payment terms. However, working on your payment terms to better deal with late payments is time-consuming. If you don’t have the time and experience in this matter, then it’s best to seek expert assistance. Hiring a business accountant to sort this out for you will make things so much better because they will be able to see all aspects to improve payment terms for your company. As a result, this reduces the chances of late payments and ensures a stable cash flow.
Are you looking for the best small business accountants in the Gold Coast? Then you have come to the right place! New Wave Accounting is a trusted firm that can help you minimise tax and maximise profits. Get in touch with us today to see how we can help!