Successful SMEs get paid on time. Here’s how…
We regularly hear that SMEs are the lifeline of the economy. Retail Capital’s Chief Executive Karl Westvig couldn’t say it any better: “Small businesses are burning the midnight oil to keep the lights on and our people employed. They’re your local woodworker, craft beer distiller, the face of the shish n’yama, and poultry farmer. They get up every day and fight the good fight, to feed their families and bring home the bacon, all the while trying to contribute to our economy.”
The importance of SMEs in the economy could not be stressed enough, but what is the lifeline for SMEs?
Cash is King!
And it can mean the end to a business when the cash supply gets cut off! What is the point in sitting with large amounts of customer receivables and having business roll in, but you are unable to convert it into the cash that is so desperately needed to pay suppliers and salaries?
SME owners and management are all too familiar with that awkward conversation that happens every day in the life of an SME. It is a degrading feeling to beg for every sent that is owed by customers or clients, and a very difficult task when you as the entrepreneur are the customer relationship manager and the debt collector.
What if there was a way in which the hassle of getting paid is taken out of the equation?
There are ways to help you getting paid on time:
Ask yourself a few pertinent questions:
If it is on account, you immediately run the risk of getting paid later than anticipated. And even when customers are paying on time, you are still financing the period that the customer gets to pay. When last did you revise your customers’ credit terms and considered imposing credit limits, which by the way, Xero can help you with as well.
Isn’t it time to consider some alternative digital payment methods that are easy, convenient, fast and secure? Have you ever considered that the way you are expecting payment isn’t in line with your customers’ expectation? You might be putting a brake on cash inflow without even realising it.
Do you utilise all revenue channels, including online stores? Insights from McKinsey say online shopping is here to stay and because of the nature of the online store, payments that are made online are concluded on the spot.
Gen Z, the tech savvy generation, are about to surpass the total population of millennials. This means that most of the world population will be a tech-savvy and tech exposed generation and they are on the brink of getting into the market. The result? A growing trend for digital payments and people is not only getting more comfortable with it, they expect it.
While it is important to ensure that you get paid on time, also remember to pay it forward. How are you paying your suppliers? This is most probably the neighbouring SME whose lifeline is hanging on a thread and might very well be dependent on your payment. This neighbour might be the one that keeps the supplies going so that you can continue running your business. Collaborate with your suppliers and do your part in keeping the cycle alive.
Adapting to embrace the changing digital environment goes further than freeing you up to focus, it also keeps your business King of Cash!