If you run or manage a small business, there’s a lot about accounting that’s in your control: payroll and taxes are just a few. But when it comes to how you maintain cash flow, you’re probably relying on payments from customers.
More than we’d like to admit, those customer payments often come in late. And late paying customers pose a major risk to the livelihood of small business cash flow.
What happens when you’re ready to outgrow your current accounting software?
An Intuit study, as reported by Small Business Computing, found that 69% of small business owners said that “they’ve been kept up at night by ongoing concerns about their cash flow status.”
The same study reports that “33 percent of U.S. small business owners said their company currently has more than $20,000 in outstanding receivables.” At the same time, “the average U.S. small business has $53,999 in outstanding receivables.”
Those are significant numbers for small businesses. One solution to helping solve them? ERP software.
Why Customers Pay Late
Block Advisors, a tax preparation group, has pinpointed one of the top reasons customers don’t pay on time: payment options aren’t convenient enough.
There are other (perhaps deeper) reasons, too. Outdated payment processes, poor communication between your company and your customers, and lack of project insight all contribute to late payments.
Preventing late customer payments is all about establishing clear lines of communication with customers. That means you have to make things easy for them, and you have to remind them (in tasteful ways) of the value your product or service provides.
In many cases, these issues are unavoidable. But, by utilizing the best ERP software, they can be remedied.
How to Avoid Late Payments
Here are some strategies and processes you should have in place to make sure customers are happy. They’ll keep your payments on schedule and your cash doing what it was meant to do: flow.
Understand Who Owes You, and How Much
Before you do anything, you should understand how much your customers owe you, how much has been paid and credited, along with late payments. A detailed accounting software can produce these reports in seconds, allowing you to filter for specific customers and date ranges.
If you’re not keeping track of this information, it’s going to be very difficult for you to properly understand your cash flow. The best approach to tracking? Consider software that integrates accounting with both customer and project data. That way, you’ll always be sure your numbers are correct. Having to pull data out of different systems and check for accuracy unnecessarily wastes your employees’ time.
Accounting software with a powerful customer portal will show you all of your accounts receivable transactions that your customer is responsible for, including invoices, credit memos, payments, sales receipts, check refunds, and journal entries.
Give Customers an Easy Way to Pay You
Know that feeling you get when you’re in line at the grocery store and the person in front of you is paying by check? Frustrating, right? That’s because, to all of us who pay with cards, the process of writing a check has become too painful to watch.
Now think about your customers having to get stamps and envelopes at the post office, finding their checkbooks, writing the checks, finding a mailbox…
You get the idea. It’s laborious and time-consuming for people to pay you with a physical check. By giving your customers an easier way to pay you, you’ll not only make them happy—you’ll get paid faster.
So how should we define easy? A couple of clicks (or less)! Having a portal where customers can log in, find their invoices, and pay them by credit card or e-check instantly is an ideal solution. Even better, they’ll get immediate confirmation the invoice was paid. Customer portals also allow them to track their payment history.
Give Customers Insight into Project Status
Great relationships with customers are built on transparency. The more insight they have into the work you’re doing for them, the more they’ll see the value of that work. And because great relationships enable smooth and reliable payments, you’ll be setting yourself up for success.
Think about it this way: if your customers have to inquire about the status of a project, they’re probably already unhappy. Being proactive and, more importantly, giving customers the tools to be proactive themselves will prevent the need for project conversations in the first place. With software that has a customer portal, they can log in, check the project status, and feel confident that you’re on track.
Conclusion
Running a business well depends on maximizing cash flow, and timely payments from customers contribute significantly to your company’s financial health. But those payments aren’t just transactions— they’re representations of relationships that you’ve worked hard to create.
Having the right ERP software to make sure you’ve enabled a good relationship and a streamlined payment process is only part of the story. When you give customers insight into the work you’re doing for them, you promote the value of that work.
When you’re looking for software that has the right features to make your customers happy and get them paying on time, think about their experience with your product or services. Put yourself in their shoes. What will keep your company top-of-mind for them? What will keep them happy? When you’re able to match functionality with your customer relationship goals, you’ll have found your solution.
