How can I make payments in my business?

As much as a business likes to watch the money flow in, it’s also important to ensure your key people – such as your suppliers and staff – are paid in a timely manner. Using the right payment methods can save you time and give you a clearer picture of your business’ cash flow position.

What are the best payment methods for my business?

The best approach to making payments depends on a number of factors including the location of your suppliers, the size and frequency of orders, your day to day payment needs, and the number of people in your workforce. All of which means you may use a variety of payment methods.

Paying small amounts

For smaller transactions, a business credit card or business debit card could be the most convenient and measurable way to pay. 

With the interest-free period of a credit card, using it to make purchases is like having a short-term loan you can pay off each month – or pay interest on. With a debit card on the other hand, you are drawing on funds in your bank account, so your account balance is effectively your limit.

Both types of card have the benefit of cashless convenience, and with some credit cards you can earn rewards for business purchases.

As is the case with your business bank account, with credit cards it can be a good idea not to use a personal card for business expenses. Downloading your business-only transactions as a spreadsheet will help with accounting and keeping your personal and business finances separate makes tax time much easier.

To help speed up reconciliation, some banks – including Westpac – offer integration directly with small business accounting software through online banking.

Paying suppliers

Your suppliers will dictate how they wish to receive payments, and may offer options that include cash, cheque, electronic funds transfer and BPAY®. Cheques are becoming less popular due to their turnaround times.

Electronic funds transfer gives you an automated method to make payments through your online banking. Payments can be scheduled, so you can hold onto your cash until the final payable date, and with some banks – including Westpac – you can set up multiple payments at one time to pay in batches.

Other time-saving payment features you may be able to access include importing payee files and creating payment templates.

How to get a business debit card or credit card

A business debit card might be included when you open a business transaction account or one can added as an optional extra, so check what’s available when you compare bank accounts.

 

You’ll need to go through a separate application process to get a business credit card, which will involve verification of your financial situation and income. Many types of card are available, including some that offer rewards points and others low interest, so think about what suits your specific needs when you compare business credit cards.

Making overseas payments

Paying overseas suppliers can be more complex, as you’re exposed to exchange rate movements, foreign exchange related fees and transaction fees. There are different methods available depending on payment frequency and the size of your transactions.

For smaller transactions, some overseas suppliers may accept credit card payments, which you may find simpler and more convenient if only making a one-off transaction.

If your business regularly pays overseas suppliers, you may wish to investigate alternatives. For example, you might find that your bank offers a feature allowing you to complete an international money transfer as part of your online banking. The exchange rate offered on these accounts may be more competitive than credit card rates, so it is worth taking your time to compare. 
 

While it may not be easy to avoid the fluctuating nature of foreign exchange rates, there are some strategies available that could provide you with more certainty, including:

1.  Setting up foreign currency accounts in the currencies of your suppliers.

To help manage exchange rate risk for foreign currency payments, a foreign currency account allows you to transfer money between your foreign currency account and your AUD account when the rates are favourable. This account also allows you to receive foreign currency payments in the respective currency, which may be used to make international money transfers at a later stage, minimising any unnecessary conversion to, or from AUD. However, there are currency risks associated with changes in the value of the Australian dollar with the funds being held in the foreign currency account.
 

2. Fix the price on contracts.

When needing to make a payment for a future date, rather than accepting the exchange rate on the day, a foreign exchange dealer may be able to help you fix the rate. While you may miss out on advantageous exchange rate movements, it could give you more protection and cashflow certainty.

Other foreign exchange risk management alternatives are available, so you may wish to consider speaking to a foreign exchange dealer.  

Paying staff

Your team members are your most important stakeholders and you can’t afford to be late with payments.

If you have more than just a few staff members, hand over the details to a payroll manager or bookkeeper if you can and let them manage and calculate payments. Remember, you need to accrue personal leave, annual leave, superannuation payments and allow for flexible hours.

There are packages where you simply provide a spreadsheet with all the details, or there are software packages where you input the data. Ensure their package integrates with your accounting software, as you’ll need this information to calculate taxes, such as payroll tax.

If you’re making your own staff payments using small business accounting software, online banking features such as bank feeds and batch payments will simplify your accounting.