We have all had customers that for one reason or another choose to pay late or even try not to pay at all. One way that you can make it easier for customers to pay and harder for them to make excuses to pay late is to tighten up your credit control function and make the payment terms you offer as efficient as possible. There are a whole range of payment methods available but some may suit a particular sector or customer base more than others. Some of the more popular methods are listed below.
This is the most popular form of payment business to business and allows the transfer of money directly form one bank or building society to another. This is a really quick and easy method of making payment with the only drawback being that funds take 3 days to clear. In 2015, 6 billion UK payments were made through the Bacs system with a total combined value of more than £4.4 trillion.
This can be a suitable method for customers to make payment, especially if they are paying for a subscription service or any other regular payment. It also means that they don’t have to remember to make payment as the funds go from their account on an agreed date every month, week etc. This method of [payment is regarded as the safest way to make payment in the UK as the Direct Debit Guarantee protects customers from fraudulent payments.
The traditional method of paying by cheque is still puzzlingly very much alive and kicking despite the digitilization of finance. This method of payment has long been the butt of jokes and allows customers to extend their payment terms by 5 working days whilst the cheque clears. Cheques are also prone to human error as they can be either genuinely or deliberately filled out incorrectly leading to greater delays.
However on 30th October 2017 the start of the phased roll-out of a new, image-based cheque clearing system that will speed up cheque processing significantly for customers across the UK began.
One of the main benefits of an image-based system is that the cheque clearing process will be speeded up. It means that if a customer pays in a cheque on a weekday (Monday to Friday) and it is cleared via the new system, then they will be able to withdraw the funds by 23.59 on the next weekday (excluding bank holidays) at the latest.
By summer of 2018, all of the UK’s banks and building societies will clear all cheques via the Image Clearing System to the faster timescale, hopefully putting a stop to customers being able to extend their credit beyond agreed terms.
Only around 40 % of businesses accept payment by credit or debit card despite the possible convenience for your customer. This can be a good stand by to offer customers if they are late paying as it makes it harder for the customer to stall with excuses.
PayPal is the most recognised form of online payment and is working towards B2B payment demands integrating with an online invoice issuing company to streamline the process of the invoicing and payments space by reducing reliance on checks and electronic funds transfers. Bitcoin has recently enjoyed a surge in popularity in the B2B sector due to its low transaction fees and robust security. Bitcoin has developed its BitPay service which offers a 1% settlement charge and negates all the hefty credit card processing fees. Although Bitcoin is becoming more popular not all industries and outlets accept it at present.
Whichever payment methods your business chooses to accept it’s really important that your invoices include your business sort code and account number, company address and the name of the account that the money needs to be paid into. If you also trade overseas don’t forget to make sure your IBAN and BIC are included on your invoices.