At a certain point, every growing business needs to take a leap and invest in new technology. It can be daunting and expensive, but the rewards can greatly outweigh the costs and stress.
Collecting payments earlier to help manage your cashflow is one of the most important aspects of any business. This is one area where technology can make a huge difference.
So what are the signs that you should consider an integrated payments platform like simPRO Payments?
1. Escalating debt or administration costs
If chasing late payments is taking up more than 5% of your time as a manager, or administration staff are spending more than 30% of their time chasing payments, you need a payments partner.
While some clients will always be stubbornly resistant when it comes to paying their bills, others simply don’t have an easy way to settle their accounts. By making it easier for your customers to pay, a payments partner can free up both your time and your staff’s time to focus on more productive tasks.
2. Your average collection period is worse than average
Outstanding payments, or ‘Accounts Receivable’, can be one of the most significant assets on an organisation’s balance sheet. As a percentage of total assets, accounts receivable has been estimated to constitute 20% for large organisations and 30% in small/medium sized organisations.
A recent study found that the average amount of time it takes for an invoice to be paid in Australia is 26.4 days overdue – the worst of any country in the world! In Mexico, the second-worst offender, that figure is 18.6 days overdue. Compare that with Japan, where on average invoices are paid 6.5 days early.
If you don’t already track it, you should be fully aware of your Average Collection Period (ACP). If you are unsure on how to work it out, get your accountant to create a report.
While there is no definitive guide to what is a ‘good’ or ‘bad’ ACP, the Australian average should be a starting benchmark. If you are outside this average you need to look at what is causing payments to be so slow and investigate in solutions, including partnering with a payments company.
3. Your interest bill is climbing
One of the most obvious signs that your cashflow is being impacted by late payments is the amount of interest you pay when borrowing money to fund your day-to-day operations.
Most businesses will often have some sort of overdraft facility that allows them to meet their obligations while they wait for their outstanding payments to come in.
While interest rates are falling, this interest bill should be getting smaller. If you are paying more interest now then you were a year ago, it is probably because your debtors have been extending their payment terms.
Is it time?
While every business is different, these are just three simple ways you can use to identify and measure the impact of late payments on your business. The solution to these problems is never simple, but partnering with simPRO and making it easier for clients to pay should be the first step.
To help, NECA SA members use simPRO job management software for free!
As a NECA SA member, you’re eligible to receive one simPRO Service office licence and one simPRO Connect field licence free for the life of your membership. A saving of $1,176 per year!
Terms and conditions apply. Please see the website for details.