Getting paid faster is on many small business owners’ wishlists. Late payments are a constant bugbear for many and for some, a serious problem threatening their livelihood.
Thankfully, technology is on their side. Modern accounting software now enables small business owners to send invoices from a job site and to accept cashless payments on the spot. These are just two solutions that address the challenges of outstanding invoices and maintaining cash flow.
When electrician Simon Gordon left a big company to launch his own, he wanted to set up the administrative side of his business correctly from the get-go. For him, it was all about making life easier at the end of the day.
“The less time you can spend doing bookwork, the more time you can spend out there working or selling yourself and your company,” he says. “It’s better for yourself and the company.”
When Gordon established Simtec Electrical, an electrical communications company, he purchased a suite of subscription-based accounting technology, and payment system Westpac Genie. He uses the Genie card reader to take credit card payments from anywhere, at any time.
As much as a cash flow saviour, Gordon also benefits from it as a timesaving measure that sees him spending less time balancing the books out of business hours.
“If you can get an invoice done on that same day and sent off, then that means you’re doing it there on the job – sort of getting paid for it at the same time,” he explains.
“Whereas if not, you’re having to take it home and do it in your own time.
“So if the client wants to pay on the spot, no worries at all I can do it and the money’s in my account.”
Late payments require constant monitoring by business owners. When payments don’t arrive on time, business owners are forced to take time away from their businesses to follow-up bills with reminders or negotiate payment plans with customers.
Accepting instant credit card payments means less waiting and less chasing. It also means small business owners don’t shoulder the entire burden of debt collection, Gordon says.
“If people can pay with their credit cards, it suits me fine because I get paid, I don’t have to wait for money,” he says.
Best of all, today’s accounting systems are geared to change pace as a business matures. For example, Westpac’s Genie allows business owners to manage invoices across more than one device such as smart phones and PCs.
It means employers can gain vital, and up-to-date, information about their customers’ payment and invoicing status, which can be used to inform new staff, as soon as they start on the job. That way, everyone in the business is on the same page and there’s less room for error.
These forward thinking strategies were what motivated Gordon to use the latest in accounting and payments technology from day one.
“You’ve got to put processes in place, otherwise you find yourself staring at the computer and getting lost,” he says.
“Before I went out on my own, I was in the office as a junior project manager and I sort of saw the processes in place on a bigger scale. So I put them in principle for what I do.
“I hope to grow and those systems will be in place with the business as it continues to grow.”
Poor cash flow is to blame for 90 per cent of small business failures, according to credit information company Dun & Bradstreet. While debtors and unreliable clients are responsible for a portion of this, unfortunately some small business owners are their own worst enemy when it comes to managing cash flow.
Passion and expertise were the driving forces that ignited their business dreams in the first place. But when they realise running that business requires skills they aren’t passionate about and have no expertise in, things can go wrong.
Projection accounting is essential in any business to maintain a healthy cash flow, and cannot be ignored, says Jeff Hurdis, Westpac SME acting general manager.
“It’s such a critical part of managing a business, and getting information that actually shows the business is fit and growing,” he says.
“Effective cash flow management can provide a benchmark for the business. You can have a profit at the end of the year, which is important, but it doesn’t mean you have money at the business’s disposal.
“Certainly, effective accounting which includes cash flow forecasting will indicate where the business’s cash is going and how tightly it’s managed.”
Balancing the books becomes easier with the help of a support team. Small business owners are typically skilled networkers, which gives them the advantage of collecting a lot of information to enrich their day-to-day business affairs.
For example, how does a similar business manage late payments? How do they negotiate with problem debtors?
Add a knowledgeable banker to this network for further insights and advice, says Hurdis.
“I think one of the hardest things to do is run a small business, as it can be quite isolating,” he says.
“In a big corporate there’s lots of people around and there’s always someone who has the answer. SMEs don’t always have that, so it’s important they have local networks.
“It comes back to asking for help and certainly a banker is a key part of that. At Westpac, we want to help make Australian businesses stronger and we do that through interactions, building relationships and having strong partnerships.
“We want to be part of the business. We’re in a partnership and we know we add value from our banking specialists to have conversations with customers.”
Getting paid faster can be simplified with the right tools and the right know-how. It’s the key to healthy cash flow and the knock-on effect of spending more time in the business, rather than on the business.