Are you making it easy for your business to be paid?
There are several reasons that customers may choose not to pay on time. But one of the ways your business can make it easier for your customers to pay is to make your credit control more efficient by addressing the payment methods you offer. After all, the easier it is for your customers to pay, the fewer excuses they’ll have not to.
There are a range of payment methods your business can offer, but some will be more suited to a particular sector or customer base. Typically, the more options you offer, the more likely it is you will receive payment on time and in full.
The most popular method of payment between businesses has experienced further growth towards the end of 2016, increasing by 5% to £3.5 trillion. By increasing the speed at which the money enters your account and reducing the administrative burden on your customers, this goes to show that established payment methods still hold the candle to reliability. They are, it seems, firmly in favour with both businesses and consumers.
Some customers may also be suitable for paying via direct debit, which is primarily used for taking regular or recurring payments like household bills, subscriptions, memberships or charitable donations. It can also be used for one-off payments, and is regarded as the safest way of making payments in the UK as the Direct Debit Guarantee protects customers from fraudulent payments. This method increased by 4.9% in 2016 to £1.3 trillion.
Interestingly, the digitalisation of finance has failed to dampen the popularity of the traditional cheque, with 51% of B2B payments made via this method in quarter three of 2016 and two-thirds citing they would experience problems as a result of not being provided with the facility to write cheques.
Although cheques must be posted, take time to clear, are prone to human error and leave you open to common late payment excuses such as ‘the cheque is the post’, this may not be the case for much longer as changes to the way cheques are being processed may make it easier for SMEs to cash cheques in the future.
In contrast, only 44% of businesses accept payment by debit or credit card, despite the convenience for your customers. If, for instance, you’re having trouble getting a customer to pay up you can offer to take a card payment over the phone, making it harder for the customer to stall with excuses. Additionally, for contracted customers that pay the same amount on a monthly basis, your business may want to consider allowing payment by standing order.
Web-based outlets such as PayPal and bitcoin permit users to transfer converted virtual currency efficiently and securely through the internet, and bitcoin particularly has enjoyed a recent surge in popularity in the B2B sector. Initially popular with micropayments, due to the robust security and low transaction fees, Bitcoin’s B2B venture aims to continue their success using their dedicated BitPay service.
BitPay enables businesses to keep more of their money by avoiding hefty credit card processing fees, offering a static 1% settlement charge. It also offers the flexibility to sell to anyone, anywhere, and does not require sensitive information – eliminating the risk of chargeback and identity theft. However, not all industries and outlets accept bitcoin as of yet.
On the other side of the coin, the widely-recognised PayPal works in a similar method. Initially consumer focused, offering enhanced security and ease of recognised currency payment, PayPal continues to work towards B2B payment demands, integrating with an online invoice issuing company to streamline the process of the invoicing and payments space by reducing reliance on checks and electronic funds transfers.
The most important thing for your business to remember is that, whichever payment methods you choose to accept, your invoices should include all the information your customers may require when making payment. This includes your business sort code and account number, your company address and the name of the account which cheques should be made payable to.
When trading overseas, it is also important to make sure that your IBAN and BIC are included on invoices to allow foreign customers to pay. Also, make sure that if you are billing in currency, you are able to accept currency payments into your account. For more tips to help with invoicing – take a look at our blog on common invoicing mistakes.
You may like to download our free eBook, entitled ‘The Essential Guide to Credit Control’, to improve on these methods. You can click here to download it.
If you would like to hear more about how you can reduce the issue of late payment for your business, as an experienced credit control and collections agency, we can help. Our team would be pleased to assist, and are available on 0800 9774848 or emailed at firstname.lastname@example.org