Neil Aitken gives advice to small businesses on how to keep cashflow moving
Installers have among the highest rates of sole traders and small businesses of any industry in the UK. While there has been an increase in start-ups across all British business since the financial crash, plumbers, heating engineers and other traders were self-employed before entrepreneurship was the buzzword of the day.
While the rewards of being your own boss are significant there are, of course, challenges that you don’t face when working for someone else. Most sole traders will say that one of the biggest challenges they face is getting paid on time, with 29% saying that they have stopped working for a customer due to consistent late payments.
Poor cash flow is one of the major causes of day-to-day business worries but there are ways to speed up payments reaching your bank account:
Don’t depend on cash
Being paid in cash is a simple and convenient way of doing business but, in the last five years alone there has been a 14% fall in ‘physical’ cash use and in May 2015 the use of cash fell behind other payment methods for the first time. People are now less likely to have cash to hand to pay for things and this can easily lead to a delay in payment.
Offering customers choice and convenience should be a priority for any businesses at every stage of a business relationship, including payment. Giving your customers the choice to pay you in a way that is simple, secure and easy for them will improve the chances of getting payments on time and reduce the time you have to waste chasing for them.
Time poor, cheque rich
Cash is ‘immediate’, but a trip to the bank branch isn’t. Finding time to visit the bank when you are working can be difficult and cheques (if you still accept them and your customer still uses them) can add delays as you wait until the funds clear before they reach your account.
Credit and debit cards are an option and your customers will almost certainly have access to these in order to pay you immediately. However, these can be expensive for smaller businesses and not always practical for sole traders when you are required to have card readers to make transactions. There are now a number of alternative payment methods that are cheaper and more convenient for the smallest businesses, such as mobile payments and online banking.
The benefits of embracing technology aren’t just about the business, they can make payments for goods and services quicker and safer for customers and make it a great incentive for repeat business.
Online payments methods offer a quick and secure way for people to pay small businesses and are easy for a business to set up, though there are still some costs involved.
While online payments have been around for a few years, the explosion in mobile devices in recent years has led to the development of mobile payment options, such as Paym, which is a service offered by 17 UK banks and building societies.
All of these banks and building societies offer the service to their personal customers and a growing number are rolling it out for their business accounts too. Once registered, businesses can receive payments directly to their relevant business bank account using just by using their mobile phone number.
As a sole trader or small business, you will have many priorities in the day-to-day running of your business; taking away the burden of chasing payments from customers means you can concentrate on other areas of the business that need your attention and time.
Neil Aitken is spokesperson for Paym www.paym.co.uk