Which payment methods should your business offer?
Getting paid on time is a vital aspect of business and the payment methods you offer can have an impact on whether or not this happens. So, which payment methods should businesses offer their customers?
The truth is there is no universal solution. Each business is different so what works for one will not necessarily be successful for another.
Arguably, the more payment methods your business offers the easier you make it for customers to pay – and the less likely it is they’ll pay you late.
But, don’t just offer everything for the sake of it. Depending on your business and its client base you may not need – or want – to accept some methods of payment.
Here we look at the pros and cons of some of the most common payment methods to help you decide which will work best for your credit control team.
Cheques are still a popular method of payment for many businesses and older consumers. But, by accepting cheques, you are giving your customers control and could be opening up your business to late payment excuses such as ‘the cheque is the post’. Cheques take time to clear, are prone to human error and can bounce, leaving you waiting for payment well beyond your agreed terms. As a result, many businesses have stopped accepting cheques, but by doing so you could be losing out on some big business as many companies still insist on paying this way.
Banks Automated Clearing System (BACS) is a popular choice for both businesses and customers as it increases the speed in which the money enters your account and reduces the administrative burden on your customers. Some businesses worry about the security of this method, but in the highly unlikely event that you do run into problems, there are measures in place to recover your money.
Whilst extremely popular among consumer payments, credit and debit card usage among businesses has been slower to take off. Processing fees can be expensive and there is a risk of fraud. But, card payments can be quick and convenient. Particularly if you’re having trouble getting a customer to pay, you can take a card payment over the phone, making it harder for the customer to stall with excuses.
Once, cash payments would have been the norm but, with the rise of electronic payments and cards, most of the population have stopped carrying money. And, as a result, some businesses have chosen not to deal with cash at all. Especially when dealing with large amounts of cash, you will need to be extra vigilant with your bookkeeping to stay out of trouble with HMRC. Plus, having lots of cash around puts your business at a greater risk of theft or loss and you’ll need to make plenty of trips to the bank. But, taking cash payments means you get paid immediately and avoid additional fees which can be tacked on to other payment methods.
Whatever your business decides to offer, the most important thing is to ensure your customers are clear on their options and know exactly how and when to make payment. This is best achieved by including all the relevant information on your invoices. This can include your business sort code and account number, your company address and the name of account which cheques should be made payable to.
For more credit control tips please download our free essential guide to credit control.