Most startups will know that late payments continue to be a problem. While small businesses are rarely top of the list of priorities of bigger companies looking to pay the bills, it may come as a surprise that research has found individual consumers to be the worst offenders.
According to research from WorldPay UK sole traders and mobile micro businesses could be owed up to £2.5bn by late paying customers each year. What's worse, nearly all of this debt - £2.4bn – ends up getting written off. The survey of more than 1,000 mobile tradespeople and micro businesses in the UK reveals that 75% of respondents have had a late payment in the last 12 months. Among those who have been paid late in the last 12 months, 45% have experienced cash-flow problems.
Now at least, technology, especially cloud technology, has made it possible for small businesses to combat late payments, including many that are mobile and operate on the move, and can take payments digitally, either through handheld devices or web-based apps.
According to Gareth Waters of Welsh creative and web design agency Brand Nu Creative, the key to avoiding late payments is giving customers options. "I always give customers 30 days terms, but I try to factor in as many options as possible, so they can pay through mobile banking, bank transfer or PayPal," he says. For the last 18 months he has also used the Barclays app Pingit. "Pingit is just one of the options I give them," he says. "It is so easy to use. You link your account to your mobile phone number and the client can pay you through that."
Payment on the spot
Penny Hatfield, owner of the Nail Lounge, a mobile nail business, is one of many startups who have benefited. Where she used to rely on people to pay in cash or cheque when she visited them in their homes she can now use her mobile linked to a compact keypad to take payments. "As a small business, it can be hard to keep track of all the money coming in and going out. I found myself constantly checking my diary to see what treatments had been done and who had paid for what and when," she explains. "With the app, I can see all my payment history in one place."
When the Langford Fivehead hotel opened a year ago owner Rebecca Jackson wasn't set up to take payments. "We started trading earlier than expected and we didn't have a business account in order yet," she explains. "So we were receiving guests on good faith, they transferred money by BACS when they checked out. One of them recommended the iZettle system, we looked into it and it has turned out to be really great."
The iZettle device connects to Jackson's iPad via Bluetooth. The facility charges a flat rate for all cards and processes payments faster than a normal merchant banking device would. "If people check out and pay their bill on Sunday morning, on Monday night we get an email saying how much money will be credited to our account and by Wednesday it is all in the bank account," says Jackson. "The fees are deducted at source so you know exactly where you are in your banking position."
She has recommended the system to entrepreneur friends who run mobile businesses. "With Wi-Fi you can just link the device to a smart phone via Bluetooth and you can take payments in the high street," she explains.
Cash flow efficiency
As well as improving cash flow, it also presented a professional business image for the hotel. Jackson was originally planning to ask customers to pay through PayPal, which she thinks would have been less efficient. "At that point there wasn't a device that we could use, so we would have had to get people to log into a PayPal account, which wouldn't have been very fluid," she says.
Diane Hill's rural business Hill Stained Glass has accepted card payments for 18 months. She was reluctant at first, but has not regretted the decision. "I noticed that more and more people wanted to pay substantial amounts by card rather than cheque. It is about taking on board how customers prefer to pay and giving them a facility that they wanted," she says. It makes it easier to make the sale too. "When somebody has just come to my studio and it is essentially an impulse purchase, the customer will pay a deposit using their card and it means they can go ahead with the commission and not go away to think about it," explains Hill.
Peace of mind
For Hill using the device gives peace of mind. "Instead of waiting for cheques to clear you get the money a lot quicker. It really helps with the cash flow and just moving the money around in your business," she says. "If it is a large amount, you know the money is going through straight away rather than wait around for a cheque to clear."
Now that Jackson's hotel is up and running there is no need to go anywhere else for the payment system. "Now we are established and have a business bank account they are starting to push their merchant services but we don't have any reason for moving now," she says.
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