Smart small business payment strategies

Managing customer payment options to help support good cash flow has never been more important - and it’s easier than you think.

What we'll cover

• Overcoming small business payment challenges
• Payment solutions to help boost cash flow
• 5 simple ways to improve cash flow

 

We talk to the experts for their tips on how to improve your business's cash flow.

Overcoming small business payment challenges

The ‘push me, pull me’ aspect of cash flow management is a major issue for many small businesses and sole traders.

While there’s a multitude of reasons why cash flow challenges arise – from shifting market conditions to sudden growth or accounting oversights – some are easier to address than others.

“Unreliable payments can have a knock-on effect – meaning small businesses awaiting payments are then late in paying their own suppliers, causing businesses to stall,” says Emma Fawcett, General Manager SME, at business management platform MYOB.

“Most small business owners can relate to the feeling of being profitable ‘on paper’, while their actual bank account sits empty, awaiting outstanding invoice payments,” she says.

However, while the odds can be stacked against small business, Fawcett has cheering news. “When it comes to paying small business invoices, more customers are taking a ‘sooner rather than later’ approach. Average invoice payment times have dropped from 28.5 days at the end of 2019 to around 26.6 days in the first half of this year," she says.

Payment solutions to help boost cash flow

Customers may be improving on the timeliness of payments, but it’s also up to small businesses to offer a range of effective options for how they accept payments to ensure they are paid as quickly as possible. Let customers pay their way. New online payments methods keep it simple.

One of the latest is the Tap to Pay EFTPOS Air app, which allows businesses and sole traders to accept card payments on smartphones and tablets. It's quick to download the app and speedy on payments, with same-day settlement to help support good cash flow.

Another method is asking customers to pay bills via a registered PayID®that simplifies electronic transfers (see more below) and helps facilitate prompt payment.

The importance of faster payment solutions and positive cash flow management are set to hit new heights as the economy is forecasted to slow down with increased inflation and cost of living pressures.

As MYOB’s Emma Fawcett notes for almost one in five SMEs (22 per cent of respondents) cash flow is a cause of ‘extreme’ or ‘quite a lot’ of pressure.

But there’s more than a ray of sunshine amongst the clouds for the SME sector, maintains Fawcett. “We know Aussie small businesses are amazingly resilient.

Our SME Success Report and SME Resilience Index showed most Australian small businesses are more resilient now than they were pre-2020, before the pandemic, and 67 per cent of SMEs stated they are now as profitable or more profitable than before.

“Gaining control of future cashflow means you’re in the driver’s seat,” she says.

5 simple ways to improve cash flow

Improve your cash flow with clear payment terms

When onboarding customers, MYOB’s Emma Fawcett recommends making it clear so they understand their payment responsibilities, including your terms for payment and the online payment solutions you offer.

“Automating payment processes and providing customers with multiple payment options will help make payments as easy as possible,” she says.

 

Choose a faster payment process

Ensuring more money owed to your business lands in your account as soon as possible is cash flow 101. It may be as straightforward as choosing the right payment method or having options for customers in the ways you accept payments.

 

Westpac’s tap-to-pay app, EFTPOS Air, is one convenient way to get paid faster via same-day settlement on transactions, helping often time-poor business owners and sole traders to stay cash positive through faster payment processing.

 

If you're meeting customers face-to-face, you can take their credit and debit card payments on the spot with EFTPOS Air. Transactions happen via your smartphone and land in your chosen account at the end of the business day. No need for a card reader. The app is free to download, and there are no set-up fees.

 

PayID® is another way to make online payments more seamless. This payment solution takes the banking layers of BSB and bank account numbers out of the online payments process. Simply register your mobile number or ABN as your business PayID® and let customers know they can make online payments directly to your linked business transaction accounts.

 

Monitor your cash flow forecast

Keeping your accounting system in order is also key to keeping track of your cash flow. Make regular acounting a habit, so you stay on top of your business’ cash position. Reconciling accounts daily is recommended.

 

This allows you to make decisions based on actual information so you can manage your incoming payments from debtors and your ability to pay creditors. You will also be able to see where you need to follow up with clients to get payment.

 

Get your financing in order

Whether you're a sole trader or running a SME, be sure to keep your business and personal finances separate.

 

If the business is doing well, considering an overdraft on your business bank account is one way for SMEs to overcome cash flow variability. It may help otherwise successful businesses to stay on top of changing seasonal demand for their goods or services or the impact of delayed payments. Ask about additional interest charged and account fees for set-up. What's the ongoing service fee?

 

A business loan – or a loan specifically designed for sole traders – may also be helpful tools.

 

Invest in your business's success

Maintaining some cash reserve is important, but so is investing in your business, adds MYOB’s Emma Fawcett.

 

“Don’t be afraid to invest cash back into new opportunities, such as digital invoicing solutions, to fuel long-term growth.”

 

Same day settlement with Westpac EFTPOS Air’s  makes getting paid on time simple. Sign up today