Recent research by Xero reveals small business owners enjoyed prompt payments in September and the best cash flow in three years. However, a closer look at the findings shows that whilst some businesses manage to get paid on time, certain industries are frequently paid late.
Xero’s analysis of hundreds of thousands of anonymous invoices with 30-day payment terms saw small businesses were on average, paid just over four days late (34.3 days) in September. An improvement from 35 days in September last year, and 36 days in September 2015.
For small businesses operating in the manufacturing industry, invoices were settled in 40 days (10 days overdue). The transport, postal and warehousing industries waited just as long, as businesses received payment within an average of 39.6 days in September.
Commenting on the factors that may result in these discrepancies, managing director at CreditorWatch, Patrick Coghlan says “small businesses are often run off their feet.
“In an industry where chasing payments is the norm, those who lack the resources to do so may be paid last,” adds Patrick.
Here’s how to better manage your customers in an industry that pays slow
Keep up to date with important changes
Whilst performing upfront credit checks on new customers helps to avoid slow payers, a business’s ideal paying habits can quickly deteriorate when certain circumstances rock their financial stability. Monitoring all of your existing customers will alert you if their score drastically changes and inform you about adverse information including defaulting on payment with other companies, court actions and insolvency notices.
Integrate accounting software with CreditorWatch
Most small businesses are under-resourced, so linking accounting software services such as Xero with CreditorWatch will immediately identify new customers that are likely to be slow payers. This saves time and reduces the need for businesses having to manually check a business across two platforms. It also automatically lets them know when great payers slowly start to draw out their payment times.
Streamline your collection processes
One of the best ways to get prompt payment is to train your customers to pay on time. Issuing accurate and timely invoices as well as setting up automatic reminders to follow up payment will demonstrate that you debt seriously. Using electronic invoices through services like Xero allows customers to pay directly via a “Pay Now” button that is linked with payment providers such as Visa or PayPal.
Take action when you don’t get paid
When all invoices and reminders have been sent to your slow or non-paying customers, consider generating a formal overdue notice or letter of demand to let them know of your next steps to retrieve payment. CreditorWatch Debt Collection Tools lets you choose from a variety of letter templates that can be instantly pre-filled with your company information and sent to your customer.