Arguably, thanks to the Internet, crowdfunding, and social media, it has never been easier to start a small business, but, as any sole proprietor will tell you, one of the main hassles involved in starting a business is finding a way to get paid. Needless to say, we are a long way from the corner store that only accept cash; however, the options themselves can be more than a bit overwhelming, and no entrepreneur wants to spend time unnecessarily setting up payment systems that won’t be used. So, how do small and middle-sized businesses get paid?
From 2015 to 2016, the number of US online shoppers grew by 20 million, bringing the number to 224 million; moreover, while total retail sales is only projected to grow by approximately 4% in 2017, e-commerce is expected to grow by 8-12%. Considering that e-commerce is growing at a fast pace compared to traditional retail and 75% of consumers prefer to pay with a debit or credit card, it only makes sense that a business would use a service that provides a payment gateway to accept/process credit/debit card sales. Needless to say, this essential service boasts the largest number of providers and setup options, from highly-customized options to monthly fees for high transaction volume businesses to per-use options for low volume companies.
Though the traditional online payment gateway may work for most transactions, it is not perfect. For example, smaller and more localised businesses, that likely do a substantial amount of sales offline, cannot rely on a solely online solution. In order to meet these needs, payment processors are utilising the mobile technology that we already carry with us. Whether it’s through the use of a dongle, a near-field communication, or even cryptocurrency, our devices can allow for in-person sales while still retaining the safety and security of an online payment gateway. Of course, for adequate protection, businesses should only consider payment authorising/processing companies who seek to identify and protect against fraudulent charges.
And when most businesses are striving to reach peak efficiency, it is important – with online orders or orders of a substantial size – to allow for the transaction to be fully settled before processing services and shipping orders.
Ideally, regardless of the payment system in place, the payment process should be clearly spelled out and entirely automated by setting up billing schedules to automatically charge recurring fees and send automatic reminders.
Still, no process is infallible, and, inevitably, every business will, in time, encounter an uncollectible account, regardless of reason. Obviously, there is no way to adequately prepare to deal with such an occurrence, and its likeliness is quite high especially among businesses, considering the statistics that nearly 40% of all B2B invoices in the USA are filed as overdue, with the percent of the overdue domestic invoices substantially higher. And furthermore, the proportion of foreign invoices, issued to US business, that remained unpaid, reaching up to the remarkable 50%.
As US business seems to top the list of frequency of late payments, it is interesting to look at the major existing solutions to collect late payments from clients in the USA: An official letter from an attorney, following all the reminders and phone calls; Factoring services to advance around 80% of the amount within a few days; Collection agencies to collect 70% of the overdue payment; Alternatively, offering that same percentage off to the client (as that is a client with a late payment history, the second time act wiser and formalise the deal with some sort of a legal agreement); Take your client to court.
Late payments are part of doing business, accept it, and use each particular late payment case as a learning experience to build an effective plan on how your business prevents and handles late payments into the future.
