Corporate collapses such as Probuild, Grocon, Pindan, ABD Group have left thousands of SMEs in the lurch and reminded the industry that success only comes when invoices are paid – not when the job is awarded.
Reduce outstanding invoices – or making sure invoices paid early or on time for example – would significantly reduce the exposure carried by SMEs. Early Payment Discounts – a concept dating back centuries – has been revitalised by technology and is seen as the easiest way to entice customers to proactively pay invoices early.
“Adding early payment discounts into your invoices is the easiest way to get your invoices prioritised and paid first, no doubt about it,” B2B early payments software, Parakeet Payments CEO and co-founder, Charles Wong said.
“Not only do discounts build customer loyalty, but it makes good business sense because having large volume of invoices sitting unpaid is risky and bad for your bottom-line.
“You want to get proactive with your invoices so if a collapse happens, you are not left with a pile of potentially worthless invoices. The goal is to have as little money owing to you as possible or as your accountant would say, reduce your Days Sales Outstanding (DSO).”
Wong believes offering early payment discounts on invoices is not new, but technology has made it easy to add real-time discount calculation into all invoices – resulting in the automatic reduction in DSO.
“Real-time discounting is the next big thing because it factors in a time element to the discount and rewards the earliest payer. Basically, the earlier the customer pay, the bigger the discount,” he said.
Besides early payment discounts, Wong suggest two important elements to incorporate.
“Your invoices must also allow online payments and have automated customer reminders set up, so you have an automated invoice workflow working for you, 24/7. Get the right invoice workflow in your business and you have the best chance of being paid first. It’s the one-thing every business should do.
“The concept is very intuitive. Reward, remind and make it easy to pay you. Get these three pillars right and the probability of your invoices getting paid early will skyrocket.”
Parakeet’s integration with Xero and Esker now allows businesses easy access to this technology.