You’re a food & beverage business owner, you have a hundred and one things to do. And as hard as you work, sometimes the most important tasks you juggle, like being paid, fall to the wayside when you’re putting out other fires in your business.
This is a huge problem I see with our food & beverage accounting clients. Not only do they have a complex business to manage, they need cashflow coming in to fund the next cycle of wages, production and distribution.
If you’re a food & beverage business, late payments mean slower growth.
Thankfully, there are four simple things I do with our clients to help them get paid fast.
That’s what I’m going to be sharing in today’s blog post.
Step 1 – Use an integrated accounting system to send your invoices
Xero is one of the best systems for small and medium-sized businesses, but in particular for food and beverage producers.
Xero’s strong integrations with inventory systems such as Dear and Unleashed mean anytime you approve a sales invoice, your stock balances are automatically updated. Integrating your accounting systems means you have the answer to the three most fundamental questions at your fingertips:
- How much am I owed?
- How much do I owe?
- How much can I sell?
When you combine this with automated follow-up emails and integrated payment methods, you’ll see a huge difference in the way you spend your time.
Step 2 – Create automated emails to follow-up payment so you don’t have to
If you’ve ever forgotten to review your debtors and send reminders for payment you’ll notice a percentage of customers absolutely don’t pay unless reminded.
The best way to tackle this is to use an automated follow-up system.
But, efficient payment collection also comes down to understanding your customers and then setting automated reminders to suit that customer. To do this, each time you bring on a new client, you need to find out:
- Who pays the bills – is it the owner, an accounts clerk, an external contractor;
- What are the contact details of the right person;
- How often their bills are paid.
In most accounting software (like Xero, our favourite), you have the option to set up automated follow-up emails after an invoice is sent, but whilst many just turn these on, set and forget…
We recommend taking it one step further:
- Customising the email message to be on brand with your business. If your customer bills are paid by an accounts clerk, they may see hundreds of emails a day so you want yours to stand out;
- Changing the first reminder to be 1 day before the due date – obviously, this first reminder should be worded more friendly;
- Turning off auto reminders for large corporate customers once you know which day of the month they pay on. These customers pay on the same day every month, so reminders only frustrate the process.
Implementing this simple system is going to cut down your time spent chasing up money and when you combine it with the last two steps, you’ll have your system set up to have as little hands-on time as possible.
Step 3 – Set up online payment methods within your invoices to reduce friction
The next step you should take is removing as much friction from your payment process as possible. The best way to do this is to integrate payment methods into your invoices so that your clients can pay you the minute they receive your invoice.
Any way you can make the payment process as easy as possible is a good investment of your time.
We find this is a particularly effective system for your customers where the owner pays the bills themselves. Not only is the owner more likely to deal with the bill as soon as they receive it so it’s cleared from their inbox, but owners are more likely to pay on time where the credit card option results in frequent flyer points.
For small business customers, online payment options are a must if you want to get paid fast!
Step 4 – Revisit and rethink your payment terms to get paid fast
What are your current payment terms?
If you answered 30 days, you’re looking a little retro right now. 30 days became the norm when snail mail and payments by cheque were in vogue and required an allowance for transportation. Unfortunately, despite huge advances in communication methods, 30-day terms is still extremely common as the default setting.
Xero reviewed the impact due date terms have on invoice payment and unsurprisingly found that whilst invoices with shorter payment terms are more likely to go past due date, you are still likely to receive your money sooner
Now that you have your systems automated, take the time to review your payment days and strongly consider reducing them. You may still have large customers who demand 30-day terms and luckily Xero accommodates setting different terms for each customer so you don’t have to keep a notebook.
Automate your business and watch it grow
When you remove friction in the payment process, you’re investing in the growth of your business in two ways:
- Creating access to more cash (meaning your next business investment whether it be stock, marketing or equipment is made sooner).
- Decreasing the time your team spends doing admin work (meaning more time to do the work that matters).
In my opinion, this is one of the simplest internal systems you can set up to grow your food & beverage business but also one of the most neglected. If your default terms are still 30 days – it’s time to get collecting!
Have a question about implementing these steps? Or want to get paid fast?