How can online service providers improve cash flow?

Cash flow is essential to ensuring businesses run smoothly, and keeping it as steady as possible should be high on the priority list for companies of all sizes. It’s all about managing income and expenditure as efficiently as possible, so you can stay firmly on course with strategic direction and company growth.

The state of a business’ cash flow can significantly impact its sustainability. When mismanaged, it can lead to additional borrowing (such expensive, short-term solutions), or it could even make it difficult to access the finance you need. In addition, it can even have serious knock-on effects, such as late payment for your own suppliers, which can really damage hard-earned relationships as well as leading to extra fees.

Staying on top credit control is crucial to maintaining good cash flow, but it can be difficult and time-consuming to ensure every single customer pays on time on top of day-to-day duties. According to Xero online accounting, the average UK small business spends around 10% of the working day chasing invoices – that’s a lot of precious time wasted. In order to solve this issue, it’s worth taking the time to think about how a business gets paid, and if there’s a better way to do it.

Direct Debit online service providers can offer a solution

When an invoice is sent, there can be a long wait until the payment arrives into the bank account – and businesses can only hope that the finance team pays on time. Even regular standing orders can be inflexible and ineffective, as it’s easy for clients to forget to renew them or fail to update an amount. These methods don’t give companies any real control over payment.

For companies who want to take payment directly from clients’ account, modern Direct Debit could be an important tool in your kit. After all, it puts businesses in control of when they get paid. Because customers will have already authorised the payment in advance, it takes away any need to chase payments. This is a trusted and secure payment method, for both the sender and the recipient – and it’s familiar to most customers as it’s widely used to pay commercial and personal bills (for example, mobile phones and household bills).

With this in mind, this form of payment is one of the most straightforward ways to ensure clients and customers pay when due. Traditionally, a lot of administrative work is involved in setting up Direct Debits, but innovative payment online service providers allow you to implement this method with minimal fuss. This kind of modern Direct Debit also means a minimal cost to your business – most online service providers don’t ask for upfront fees or costly investments when setting up Direct Debits, unlike many of the High Street banks.

So, how does it work?

Once you’ve chosen your modern payment online service provider, the first step is to send your customers a request to pay their bill via Direct Debit. Once they’ve accepted, the service provider collects the payment automatically when due, and the payment goes straight into the business’ bank account. To lighten the load even further, these payment online service providers also integrate seamlessly with accounting software, meaning payments are automatically recorded. Direct Debit has benefits for both the payer and the recipient. The customer no longer needs to manually make payments; instead, the money is taken directly from their bank account as authorised. Meanwhile, the business is control of when payment is received, and the initial set-up couldn’t be easier – it’s completed online, with no paperwork or bank notifications.

With all this in mind, many customers choosing online service providers to collect Direct Debit payments minimises accounting time significantly, along with a decrease in the number of debtor days. That’s because the software reduces the manual workload required and with many online service providers now entering the market, it’s never been easier to take back control of your business’ cash flow.

Billy Leonard is a Senior Content and Outreach Exec at Harvest Digital.