– Sonia Dorais, CEO at Chaser
Late payments represent some of the most significant issues facing the business world.
Naturally, one of the biggest issues that companies face is the impact on cash flow. With their own bills to pay, salaries to send out every month and plans that need to be put on hold when funds don’t arrive on time, a late payment can prove much more than just a minor setback.
Aside from making their own payments on time, late payments can also come at a cost. The cost to small and medium businesses in the UK when recovering overdue payments stands at an estimated £9,000 each.
The same research indicates that 2018 saw 43% of SMEs experiencing late payments, worth a combined total of £13 billion.
Naturally, the issues that arise from these delays extend beyond a solitary business. A significant proportion of late payment issues among SMEs stem from the supply chain. When one business isn’t paid on time, that makes for a delay further down the line. As a result, some companies can end up in a vicious cycle of interrupted cash flow through no fault of their own.
99.3% of UK businesses qualify as SMEs, and many of them have, often unwillingly, entered a culture of late payments. Most business owners are happy to pay on time if they have the funds available. If they don’t, they decide that there is little they can do about it. Suddenly, the late payment in question becomes far less of a priority for those that owe them money.
Late payments can also have an impact on businesses beyond finances alone. Three-quarters of SME owners report that they have lost sleep over cash flow and late payments, while 56 per cent spend what would otherwise have been family time chasing debts. In addition, the impact on mental health and time outside work means that many owners cannot devote their full attention and peak performance to the company. These factors can potentially lead to the business not operating to its full potential.
Even if owners don’t follow up on late payments personally, their businesses can still suffer as employees spend significant parts of their days chasing invoices when they have better things to do. An estimated 56.4 million hours are spent each year chasing late payments. Even at minimum wage, that would represent an incredible drain on UK businesses and one that management teams would invariably prefer to avoid.
The ultimate cost of late payments involves business closures. When the money runs out, it can affect suppliers, inventory, staff and essentially every aspect of operations.
Unfortunately, 50,000 UK businesses permanently close their doors each year simply because the money runs out due to late payments. That represents a further cost to the economy worth £2.5 billion.
It’s clear that culture and processes need to be updated for the modern UK business climate. Like most major modern business advancements, technology and software have a critical role to play.
SaaS Solutions Can Help
Most businesses will be familiar with SaaS, or Software as a Service. Most modern accounting platforms work in this way, as do popular business tools like Salesforce, Office 365 and the Google Suite.
The applications for these tools are limitless, and platforms like Chaser work to revolutionise chasing and handling late payments. By integrating Chaser with existing accounting functionality, one can automate and optimise the receivables process.
One of the best ways to prevent late payments even before starting a relationship with another business is to carry out a credit check. Many problems can be traced back to extending a line of credit of sorts to a company.. If you haven’t carried out a credit check, you might find yourself in a position where your new client is not able to settle their invoice due to having their own cash flow issues.
Chaser’s credit checking feature gives businesses an insight into how potential clients handle their credit facilities with other companies and assigns them a score alongside a suggested credit limit. This information can guide businesses on how much exposure they can afford and help create a contingency plan for non-payment.
Track Debtors and Communication
One of the most time-consuming parts of chasing late payments involves tracking which clients owe money, the stage they’re at in the collection process, and any communications received from them regarding bringing their accounts up to date.
Chaser saves time by automating the credit control process. Once integrated with existing accounting software, it will create customised schedules and reminders for every stakeholder behind on payments. From there, it will take the act of chasing those payments out of the hands of employees and carry it out themselves.
Of course, such is the importance of getting paid on time that human oversight remains essential. Fortunately, Chaser works to make life easier by collating communication histories and replies in one place for each stakeholder and compiles summaries for at-a-glance updates on active cases.
Chase Payments Automatically
Chaser works to complement the finance team rather than replace them. It is all about making life easier. It can take a few minutes to craft a firm but friendly email. But, that time soon adds up, especially with multiple late payers
Among the outstanding software features you find that even though the follow-up emails and reminders are built on initial templates, they are personalised and flexible. This extends beyond adding in unique names and addresses. SaaS solutions can incorporate different attachments based on where a client stands in the process – including the original invoice – and the sender’s original email signatures.
Offer Payment Plans
In an ideal world, all invoices are paid on time, and businesses wouldn’t need to chase any payments at all. Unfortunately, this is not the case, and there comes a point with some clients where any amount is preferable to nothing at all.
Chaser can make this happen, even among teams unfamiliar with structuring such plans and giving customers the option of paying over time.
The payment plan feature within the software can revolutionise how your company handles encouraging late payers to come to an arrangement. As well as tracking and acknowledging payments, the platform helps finance teams decide on payment frequencies and amounts, and then schedule those payment dates. Whether a milestone is met or missed, the finance team will receive a notification and act accordingly.
While there are many critical elements to payment collections, they pale in comparison to the act of getting paid. Therefore, among the best ways to encourage a late payer to bring their account up to date is to provide payment options that suit them and work with their internal processes.
You might prefer to keep records with cheques, but your supplier might not even have a chequebook. Your payment processor might only work with certain types of cards and accounts, which another business may not use.
Essentially, the broader the payment options, the more likely you are to receive any outstanding balance.
You could spend time creating accounts with every processing company imaginable. However, that merely reinforces one of the most challenging aspects of collections in terms of time spent. By switching to a SaaS solution, you can make use of all-in-one payment portals. You’ll still retain complete control over the accounts themselves and can choose which services you prefer to use.
A tool like Chaser and its dedicated payment portal will ensure that you can provide a broad selection of payment options to any business that owes money.
This task is primarily about ensuring that there’s something in place that works for all your customers. In addition, it can also unlock previously unavailable funds. Some companies leave a balance in particular accounts for several reasons. If they can directly transfer cash from one account into yours without a lengthy process and incurring significant fees, they are more likely to do so.
Not all late payments qualify as debt, but you’ll have your own processes and deadlines in place to determine when a missed payment qualifies.
Using a debt recovery agency is usually viewed as the last resort, and takes place when you have exhausted your own credit control activities. By escalating an invoice to a debt collection agency you are giving them the green signal to collect the outstanding balance on your behalf. While some control over the process passes to your collection service of choice, that doesn’t necessarily mean that you’re no longer involved.
Unlike traditional debt recovery agencies, SaaS systems, such as Chaser, offer a friendly debt collection service where all activity from the debt collectors takes place inside the application. As a result, Chaser’s debt collection users can at any point view the communication that has gone out to their debtors and the actions taken on the file.
Collections letters are often sufficient to spur action on the part of whoever holds the debt. Internally, while they feel they can hold off suppliers and clients, a dedicated recovery service will not demonstrate the same kind of patience. Payment is inherently more likely, and your SaaS system and dedicated debt collector will update your internal team as soon as any contribution to the outstanding amount is received.
Reconcile With Your Accounting System
SaaS systems designed to manage payments were not created to replace traditional accounting softwares. Tax returns, salaries and other day-to-day finances are still handled by dedicated software which is built with business finance in mind.
However, Chaser was created to integrate closely with existing accounting and finance systems that businesses use already. From Xero and Sage, to QuickBooks and FreshBooks, Chaser will work closely with your current information and update it on your behalf.
Integrations work both ways. If your accounting software receives a payment from a specific client, it will update Chaser and ensure reminders are placed on hold where necessary. Likewise, when a business accepts payment through Chaser, the accounting software will be updated accordingly.
Naturally, knowledge is power, and the finance team, along with anyone else with eyes on corporate finance, will be able to view a high-level overview of the current financial position, regardless of where payments came from.
Use Reports and Insights
Among the most significant benefits of a SaaS solution for late payments is the wealth of data provided. As a result, finance teams and owners are no longer troubled by the day-to-day management of late payments. Still, they can access a statistical overview of business-critical information at any time, from anywhere.
Close integration with accounting software and real-time updates ensures that there are no limits on what information and reports can be seen at any time. But, crucially, that data can drive future decision making within an organisation.
Analytics are an opportunity to discover whether the current credit limit policy is too stringent or relaxed. It’s easy to see at which stage of the recovery process most stakeholders tend to take action. The data produced and stored within an SaaS platform can drive future risk management and provide insights into customer patterns and behaviour.
Results: SaaS Case Studies
SaaS solutions were designed with real-world usage in mind. Chaser has already revolutionised how some companies do business as part of the ultimate goal to change the perception surrounding late payments.
Getting Invoices Paid Faster
“We are getting paid 36 days faster – with our debtor days down from 60 to about 24″
– Ravi, Director, Wren Accountancy
Relatively few late payments are malicious. Some companies simply have their own processes, which don’t always align with a supplier’s expectations.
One of the driving factors behind this is poor communication. A business cannot be expected to align with the requirements if it has no idea of preferred terms. The template-driven nature of SaaS platforms ensures that all recipients have easy access to all the data expected of them.
At Wren Accountancy, the company reduced debtor levels from over £100,000 down to approximately £40,000. In turn, debtor days fell from 60 to 24. Acknowledging the time-consuming nature of chasing late payments, not to mention the associated stress, the company found a streamlined solution in Chaser that completely overhauled its approach.
“We save at least 15 hours a week – and that’s me being stingy!”
– Rossana, Credit Control Manager, Love Brands
Love Brands is one of London’s best-known fashion wholesalers. When credit control manager Rossana Vittorielli arrived at the company, they had external contractors in place to deal with credit control. One of her first jobs was to bring that process in-house. She immediately turned to SaaS solutions to streamline a task that the business spent 15 hours on each week.
Chaser was integrated with Xero, Love Brands’ accounting software of choice, and the company has never looked back. The software remains a must-have tool in the company and forms an integral part of their finance systems.
Reduce Sales Outstanding
“We reduced our manufacturing clients’ days sales outstanding by over 75% with Chaser”
– Chloe, Virtual Finance Team Manager, SAS Accountants
One of the best ways to use Chaser is for its immediate impact. Accountants can struggle with late payments just as much as their clients, primarily if they also handle credit control on their behalf.
SAS Accountants deployed Chaser in its business and witnessed immediate results. Sales days outstanding dropped by more than 75%, ensuring plenty of delighted clients and a wide-reaching reduction in late payment culture.
Maintain Great Customer Relationships
“We collected old debts from 4 clients in just 2 weeks, all handled in an extremely professional manner.”
– Phil, Owner, Vanilla Accounting
Many businesses appreciate the inherent professionalism of Chaser. Humans have every reason to get tired of repeated phone calls and emails when chasing outstanding payments, and the process can have a significant impact on moods and approaches.
SaaS software is incapable of an emotional response and operates with the utmost professionalism at all times, regardless of where it sits in the process. As a result, companies such as Vanilla Accounting and Wolfgang Digital have not only saved time and cut the average invoice payment time but have maintained excellent relationships even with those that have struggled to pay on time thanks to Chaser’s approach.