Every growing business will, at various points in its lifetime, need to take a leap and invest in new technology. While this move can be daunting and expensive, the benefits of operating with more powerful and capable tech are too great to pass up.
Collecting payments as early as possible can help businesses better manage their cash flows, and currently there are a number of new and exciting technologies that are available to help facilitate faster and more efficient collection.
So, to help you know the right time to make your move so you can achieve maximum benefit, let's take a look at some of 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, it's likely that you'll need a tool to help facilitate faster and easier payments.
While some customers will always be stubbornly resistant when it comes to paying their bills, others simply don’t have access to an easy way to settle their accounts with business.
A payments tool can make it easier for your customers to pay invoices, and free up both you and your staff’s time to focus on more productive tasks.
2. Your average collection period is worse than average
Outstanding payments 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!
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 solutions that could help you achieve a more ideal average collection period.
3. Your interest bill is climbing
One of the most obvious signs that your cash flow 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 learn more about the payment tools and solutions that simPRO offers, click here to check out our simPRO Payments page.