Cash flow can make or break a business which makes late payments a major cause for concern. In fact, we’ve seen their devastating effect on the UK’s SME community time and time again by stifling business growth and as a result, the wider economy. In fact, in the past year 27% of SMEs have written off money due to late payment in the past year according to a report by Bibby Financial Services.
This is a particularly major issue for small businesses, as according to a report by the Asset Based Finance Association (ABFA) they have to wait an average of 71 days compared to the average of 38 days for larger businesses. Some late payments are deliberate but in many cases they are due to people unintentionally forgetting to make the payment. While this may not be sinister in nature it can have very serious consequences for SMEs.
Technology is on hand to help, but not in isolation; ultimately, if someone doesn’t want to pay, they won’t. However, by using a range of techniques and strategies, a business can encourage the forgetful or reluctant customer.
Show me the money
In order to improve invoice payments, brands need to make the process as easy and stress-free as possible for clients. This can include techniques such as placing a link on the invoice so that the client can pay directly through PayPal or by using a credit card online. Technology can also help automate the chasing process with automatic reminders to pay.
Technology like SAP Anywhere can also be used to track and prevent late payments from occurring in the first place. By using the right platform, brands are able to see which customers are within terms and which are not. This allows them to gradually build a bigger picture of customer activity and offer tailored payment terms as well as review relationships with customers who are regular non-payers. For example, as long as it’s in the contract, some clients could be offered discounts if they pay early. This can be combined with reminders such as “If you pay within the next 24 hours, we will give you 5% off your bill”.
This can seem like a big task for small businesses, but there is help available with many technology providers offering ongoing support to their clients. For example, SAP Anywhere as well as our partners, PayPal offer educational webinars that help to make this activity much less daunting. Additionally, we also offer support to enable our clients to set up and drive activity.
Digitising payments can seem an unnecessary complication to SMEs who are juggling the day to day business of the company. However, once it is in place, it makes everything more streamlined. SMEs should not get used to clients consistently paying late – thanks to technology, they have the power to improve matters.
By Toby Davidson, vice president of product strategy, SAP Anywhere