This article is the second of our three part series, ‘Using the cloud to improve cash flow’. We’re sending it to you as we feel all small businesses, will at some time, have to focus on cashflow. The reaction at that time is often to tighten the purse strings but the greater potential for improving cashflow usually comes from the money you’re already owed.
GET PAID QUICKER USING THE CLOUD
Cloud accounting solutions provide small businesses with powerful tools that save time and improve decision making through access to more timely information. They can also provide operational improvement and as we will see here, this can improve credit control.
How to get paid immediately using Xero
The first part in this cash flow series looked at how invoicing correctly can improve payment and we touched upon the ability of Xero to streamline the production of great invoices. As with so many areas of small business accounting, once Xero invoicing is setup, the process is almost effortless and being cloud based, you can access it anywhere.
We also covered how the timing and process of delivering invoices effected the likelihood of prompt payment. As we’ve mentioned, your clients and customers will value your work most at the point of delivery. We’ve heard from our own clients who have raised their invoices in Xero, as they travel away away from completing a job. In one instance they had even been paid before they got home.
This is thanks to Xero’s ability to integrate payment solutions into your invoice. When sending invoices from Xero, you can provide a link to an online version, which can show a ‘Pay Now’ button. This button can integrate with widely used card payment systems, like Stripe and Paypal, with just a few mouse clicks (if you provide repeat or subscription based services, you can also take payment by Direct Debit using services like GoCardless.). If customers are most likely to pay at the point of delivery and you can invoice at that time and provide a quick payment option, you are far more likely to be paid immediately.
It’s important to consider the fees charged by these payment gateway. Offering them to customers who already pay well may chip away at your profit. Using Xero, however, you can easily setup two different invoice templates. One for good payers, that only provides the usual bank transfer details and one for the slower payers that provides both bank details and pay now options.
Better still, Xero allows you to link both say, Stripe and Paypal to your invoices, increasing the payment options available to your customers.
Using the cloud to reduce the burden of credit control
So, what do you do if your excellent invoice template and pay now options still don’t lead to timely payment? We all know credit control is a time consuming process (on average small businesses spend 336 hours a year chasing payment) and one that can strain relationships with customers.
In the same way that providing invoices promptly aids quicker payment, chasing promptly also reduces the likelihood of a debt turning bad. It can also be important to follow a regular process, so that expectations are clearly laid out to any customers slow to pay. It’s common for invoices to be chased when they fall overdue but then no further reminders be sent for some time, giving the customer the impression that you can be ignored.
Polite persistence is key to getting overdue amounts settled.
Recently, Xero added a basic reminder feature that will automatically email customers, at staging points set by you, reminding of the need to pay. It’s a great feature for light users (say up to 5 invoices per month) but for a more powerful system, with a greater range of features, we recommend using Chaser.
It’s the best in class solution for automation of credit control, without losing the personal nature of communication with your customers. In 2016 they also won the award for best Xero Add-on, even after Xero had released their own reminder function.
Users of Chaser see an average reduction in Debtor Days of 26 days!
It integrates perfectly with Xero and has a host of options to ensure the right customers are contacted at the right time, in the right way. In fact, we like it so much we’ve teamed up with them to provide a webinar on the benefits of Chaser for your business.
MORE BLOG POSTS FROM RAEDAN
There was a great deal of fear at the start of the pandemic, not just around health but also jobs and the survival of businesses forced to closed. We all (yes accountants too!!!) had to work out how to survive. Part of that meant working out how to apply for the...
Everyone has a passion in life. But you possess something rare: the drive to turn that passion into a full-time business. The leap to self-employment can feel as terrifying as it is exciting, but with the right tools in your kit and a solid foundation beneath you,...
From dreaming to dream life: How Carrie Dennahy grew her jewellery business from an overdraft to a 7 figure bank balance
When we first met Carrie Dennahy she was in the early years of her jewellery business, trying to make her dream happen with only a £12,000 overdraft as her safety net. “Having dreamed of running my own business pretty much my whole life, I decided it was time to leave...