Time is money – and nobody knows this more intimately than a small business owner.
Research conducted by Xero has found that only 50.7 per cent of Australian SMEs are operating in the red while the rest have some degree of positive cashflow. But more disappointing than that, the data found that it took those SMEs an average of 36.2 days of waiting for payments to come in.
That, simply put, is far too much money in stasis. SMEs need to equip themselves with all available knowledge to ensure this money is paid on time – or as soon as possible.
The importance of collecting debts on time
What happens when a business isn't paid on time? Operations and workflow crumble – and that's not us being dramatic. Chasing debts means you have to take not just time, but precious resources off of areas of your business that need developing.
Instead of growing, Australian businesses are then forced to close. Further, another research report conducted by Intuit and PayPal found that 21 per cent of those who shut down were also unable to afford those outstanding debts. Because when debts start to pile up, they become harder for the debtor to pay off. The longer you wait to get money, the more the debt grows, and the less likely you get paid.
Tactics for collecting debts in a timely manner
Intuit and PayPal's data explained that one of the biggest reasons SMEs are in debt is because owners aren't invoicing upfront or offering electronic payment options. In a world that's more mobile and automated every day, this poses a big problem. Simply offering to do payments electronically can significantly improve the payment process as it makes it easier for them to pay you.
Automation is only part of the puzzle, however. All SMEs should be aware of the payment protocols for their set industry – accounts receivable standards should be in line with industry standards as they vary across the board. Knowing where/what factor is holding up payments can help you build your policies so they can combat those issues.
A big part of ensuring your debts are paid in full comes down to the relationship you have with the client. These are your customers after all, if you have a better relationship with the person who's paying the bills, they're more likely to pay debts back faster.
Finally, using a professional service takes the stress of outstanding invoices off of you allowing you to better focus on growing the business while also helping maintain that healthy relationship.
For more information on how your business can better streamline debt collection services, contact our team here at Coface today.