As a business owner who is determined to run a successful enterprise in a post-GFC business environment, you’re probably already looking for ways to improve the way you do business to increase your cash flow and ultimately your profits. In our blog post about increasing cash flow without increasing your fees we highlighted the importance of constantly improving your internal business processes around cash flow tasks like managing debits into your business, chasing late customer payments and the manual effort that goes into your monthly financial reporting.
When it comes to reducing the price of payments administration in your business, the first critical thing to remember is: all of the different tasks that go into managing payments are inextricably linked. If you improve your process around one task it will have a knock-on effect onto another other cash flow related process – resulting in even better business efficiency. For example, if you can improve the way you manage receivables into your business you will consequently reduce the time you spend chasing late customer payments too.
We’ve put together three simple measures to help you reduce the price of payments administration so that you can realise the bottom-line benefits of improved internal efficiency in your business – fast.
Start with a benchmark
First, you need to benchmark how much time your team members are really putting into administering payments. For a few weeks, ask your payments administration team to keep a diary of the time they spend:
chasing late payments (through phone calls, postal mail and so on)
tracking and reporting on who has paid and who is yet to pay
jumping between systems (such as MYOB, your internet banking portal plus any spreadsheets that need to be updated along the way)
all cash handling tasks such as counting cash, account reconciliation and visits to the bank to deposit cash.
Once you’ve established exactly how much time you’re putting into administering payments you can set yourself some measurable goals around reducing this time – and celebrate with your team once these goals have been achieved.
Chase opportunities; not payments
Our research tells us that, with the right payment automation software, most businesses could reduce the time spent on payment administration by up to 95 per cent. This means manual payment administration can equate to being a very expensive exercise – particularly if you’re escalating the chore of chasing late payments to your most senior (and therefore expensive) staff members.
Consider implementing an automated payment solution (such as direct debit or BPAY) so that you can refocus your senior staff away from the time-consuming task of chasing late payments and towards exploring opportunities to grow client accounts and win new business. That way, you’ll be reducing the price of payment administration andcreating new business opportunities at the same time.
Manage your processes; not your transactions
Many business owners wrestle with a list of accounts receivable administration tasks that don’t contribute to their bottom-line profitability. Your competitive advantage lies in how efficiently you can extract the hidden value out of the tasks on your list. You do this by managing the processes behind each task (to minimise labour and maximise cash flow) rather than spending time manually completing the individual transactions.
Start with taking a good look at your inbound payment processes. If you can develop a reliable inbound payment process that minimises the need for people to manually perform the transactional details you will reduce the price of payments administration through reducing your associated labour costs.