How to Get Paid Quickly By Big Business Customers
In this article we discuss the cash flow problem many small businesses face as providers to Big Business. Read on to discover how to solve your cash flow gap and learn 5 quick tips to maximize your chances of getting your company invoices paid quickly by large customers.
It’s an age old problem. Small business owner wins large client and does celebratory dance. Small Business Owner gulps when the final documentation comes through with longer than usual payment terms. Small Business provides goods or services to large client and issues invoice. Ensures payment terms are correct on invoice…. Large Client pays the invoice after a fair bit of chasing 26 days late after the long payment terms. It is enough to stress out any business owner and their team.
Policy Changes for Big Business Payment Terms
In November 2018, the federal government announced they would no longer grant contracts to businesses that were paying their SME suppliers outside of 20 days. You can read the full announcement here.
Small Business owners have lobbied the government for a long time for help on this significant cash flow issue. They felt that big business were exploiting them. They argued that they were using the value of their invoices as either operational capital or short term investment dollars! Some Big Business had been moving to 60, 90 or even 120 day payment terms.
The 2017 Ombudsman Enquiry
An inquiry was held by the Australian Small Business and Family Enterprise in 2017. It found that over half the small business respondents were owed more than $20,000 and the average late payment was more than 26 days late. No wonder cash flow management is challenging for even the most successful small business. In this same enquiry, 14% of respondents were owed more than $100,000 and some reported 40% of their invoices being paid late!
After this review The Business Council of Australia launched a voluntary code for businesses. This involved committing to paying suppliers within 30 days. There are currently just over 80 signatories to the code. There is still some work to do.
Our 5 Tips to Get Paid Quickly by Big Business
Change takes time and we have 5 tips to help you get paid by your big business clients as quickly as possible.
1. Consider asking stockists to pay on receipt
This is particularly relevant if you are a small business with limited revenue. If your customer really wants your product, they may entertain this suggestion. This proposal is more likely to be successful if you produce a unique or in high demand product.
2. Ensure your invoices include full payment details and the ability to pay online
Discuss with your big customer their preferred method of payment. Do you offer this? Could you?
See whether your accounts payable team has a frequently asked questions list. Does anything come up too often? Can you make this change to your invoice?
3. Ensure your invoice is going to the right contact in the right format
Copy in your relationship contact, but send your invoice directly to accounts payable. This will cut down any processing time. Check whether there is a group e-mail address for invoices. This prevents any bottlenecks due to someone being out of the office. Ensure the format is clear and easy to follow.
4. Ensure your contact details are on the invoice to answer any questions.
It seems obvious. But do it anyway. It saves questions appearing when the invoice is overdue.
5. Ensure your invoices meet all the relevant requirements
Ensure that you meet the requirements for an Australian Business Invoice. Also include any client specific coding they need. You may need to include their purchase order information. Or project codes, or the name of the person that manages the relationship for them.
But We Have Tried All That!
Some Australian big businesses customers will take time to change. They have built their processes around 60 or 90 day payment terms and will take some convincing to adapt. That is of course where our team at Invoice Money come in!
We have been offering invoice finance services in Australia since 2012. Our team have more than 60 years’ experience in debtor finance, commercial finance and financial services. We are a boutique invoice finance provider based in Melbourne, Australia.
Our invoice factoring solution lets you seek finance for up to 90% of the value of your invoice. You can arrange to finance a single invoice, or even a single customer. We then collect the payment from your customer when it falls due. It is a useful service that you can use as little or as much as you like that is cost effective and quick to arrange.
Have a think about your single biggest client and their payment terms. Are their payment patterns causing you grief? Is this because you still need to pay for product, fuel, or wages whilst they move through their invoice payment process? Imagine the power of being able to collect on that invoice just days after it has been issued!
If you are worried about late paying big business customers then we can help. Get in touch with our friendly team to discuss your requirements. You can contact our team in Melbourne or Sydney here.