Helen Hannah, commercial director at leading payments bureau First Capital Cashflow, explains how businesses can manage cash flow effectively, using a variety of strategies, including using Direct Debit as a collection method.
Anyone who has started their own business will know that in the first few years much time will be spent closely monitoring cash flow. Indeed, even when established, smaller businesses can find themselves in a sticky situation if they’re continually waiting for invoices with 30 or even 60-day payment terms to be settled.
In many industries customers now expect to be able to pay via a range of payment methods, preferring instant options that require minimal hassle. This can pile on the pressure for small businesses.
It might seem like you’re always battling against the tide, wondering where to turn.
Many businesses wrongly assume that introducing automated payment options will create additional overheads and be time consuming to set up, others worry they’ll see few benefits and prefer to stick with their tried and trusted paper based processes.
These beliefs can hold businesses back.
Looking to the long term
Ultimately, every business owner has a desire to grow. Having a clear knowledge of your regular income is a key part of making these ambitions a reality. Once you’re confident in your cash flow you can plan for the medium term, making decisions on further investment, major purchases, taking on new staff or choosing to relocate.
The key to this, is to be able to see an accurate breakdown of payments, with money entering and leave your accounts swiftly, as and when required. This allows you to optimise all your outgoings, spending within your means to achieve sustainable growth.
The simplest way and most effective way for this to happen is using an automated payments system, meaning that your financial data is reliable and always up to date.
Direct Debit is one of the most popular ways to do this.
6.22 billion Direct Debit transactions were processed in the UK in 2016, which is more than £4.8 million worth of payments made by Direct Debit over the year. This is a record for Direct Debits in the UK, and clearly demonstrates that Direct Debit is a crucial payment method for consumers and businesses.
Indeed, it remains a payment option of choice across all sectors. Despite this, many smaller businesses often miss out on the benefits, fearing Direct Debits are costly to implement or won’t bring them solid financial benefits.
This is not the case.
In fact, this established payment method has the potential to simplify a business’s financial processes.
Many people might think these systems take some time to implement and cost a large amount, thus putting Direct Debit out of the reach of start-ups and smaller businesses. But, Direct Debit systems can be implemented via the cloud, as First Capital Cashflow services are.
Our cloud-based technology is designed to seamlessly integrate with existing business processes taking only a matter of days to set up and allowing real time connectivity to financial information and complete flexibility over payments.
The real benefits for businesses are that this reduces administration costs and the requirement for staff time to be spent on implementing credit control measures and chasing late or missed payments. In short, it saves money and frees up employee time, allowing staff to focus on other, more important, tasks.
Additionally, Direct Debit is a secure, reliable, tried and tested payment method. Businesses can have faith in their payment processes, and this means customers will have faith too, leading to increased customer loyalty, which can only be a good thing for a growing business.
Buying you time
The same is true for businesses owners, by using an automated payments method, like Direct Debits, frees up valuable time to concentrate on what really matters – growing the business!
Helen Hannah is commercial director of First Capital Cashflow.