Little do they realise that a lot can be done to encourage clients to pay faster, in some cases even before the due date. Being diligent and following the invoicing tips mentioned in this post, businesses can get paid faster and maintain smooth cash flow.
1. Send Timely Invoices
For businesses that don’t have formalised accounting departments, sending invoices in a timely manner might be a tough concept to grasp. But the fact of the matter is, the quicker you send your invoice the quicker it’s going to get paid.
Ideally, you should be invoicing your clients as soon as the products/services have been delivered. Here are the reasons why you should do this:
- Setting expectations: You want to project a professional image of your business and sending invoices immediately shows you take money matters very seriously. This will build expectations with clients accordingly, and they’ll be inclined to pay you faster.
- Value of products/services: Another reason why you want to send invoices immediately is that the value of your services/products is still fresh in the client’s mind.
Most business owners delay sending invoices because it’s usually a cumbersome process. But with a specialised invoicing software, it really isn't. Once you have the software set up to generate the kind of invoice you want, it’s only a matter of putting in data and pressing a couple of buttons, and you’ll have a professional invoice ready.
2. Set Clear Due Dates
Don’t leave it up to the client to decide the due date of your invoice! Having clearly mentioned due dates for invoice payment will communicate that you want the cash by a certain time.
There’s some technical terminology for this. For example, writing “net 30” means that the invoice must be paid 30 days from the invoice date.
Novice business owners don’t even need to use this terminology. They can simply write “Payment due on DD/MM/YYYY” for absolute clarity. With this the client won’t have the excuse of not understanding the terminology as well.
It’s also recommended to write full month names to avoid ambiguity, such as “February 3, 2020”.
Don’t leave it up to the client to decide the due date of your invoice!
3. Avoid Extended Due Dates for Payments
It’s good to be flexible when it comes to payments. You don’t want to give your clients a two-day window to make payments. But you don’t want to give them too much time as well.
Do not give your clients the freedom to pay late, as they’ll naturally gravitate towards this option. A balance must be struck here, with a payment term that’s short but relaxed enough that the client doesn’t feel flustered by it.
4. Impose Late Payment Penalties
This may sound a bit harsh to some business owners, who often have cordial relations with their clients. But hey, this is the lifeline of your business we’re talking about.
Imposing some kind of penalty on late payments can be a great motivator for clients to pay on time. For example, you could add a certain amount of interest on the payment if it’s paid after the due date.
In fact, having these terms means that the client will often make the payment much before the due date, out of caution.
Don’t forget to communicate these late payment terms to your clients beforehand.
You don’t want to appear brash about late payment penalties, so here’s the correct way to do it:
- Clearly include a section on late payment in your invoice.
- Communicate and agree on the late payment fees with your clients in advance (beginning of project).
Having a clearly stated policy on penalising lateness means that clients are far more likely to send payments early.
5. Incentivise Fast Payments
The goal of effective and efficient invoicing is to optimize the cash flow of a business. To get payments as fast as possible, you may want to incentivise clients who choose to pay you on time.
For example, you could offer a small discount to clients who pay ahead of the due date. You could also offer them a gift card of some sort - you get the idea.
6. Break Down Larger Invoices
You may be working with businesses that just don’t like to pay large invoices, for a multitude of reasons.
In this case, you can try breaking down invoices into several instalments. Instead of sending them an invoice for a large sum of money after 60 days, send them invoices after every 15 days, with smaller amounts.
This will work well for both you and your client because:
- You’ll get regular cash inflow.
- The client will find it easy to process smaller invoices.
[ymal]
7. Send Friendly Reminders
Have you heard how email follow ups can dramatically improve the reply rates of email campaigns? The same goes for invoicing as well. Your client may have received the invoice but simply forgot to pay it.
This is why sending friendly reminders as the due date approaches is a good idea. You don’t have to demand that the client pay in these reminders, but rather make them aware of the fact that the due date is fast approaching.
Some business owners even use these email reminders to open opportunities regarding upselling products or services to the client. Be creative!
8. Treat Your Customers Well
This is the most basic tip we can give, but also something that’s important. Delivering quality products or services to your clients is a great motivator for them to pay you on time.
Enabled by the state, China’s technology companies have been able to influence consumer technology adoption in a much more homogenous way than in the West. Its digital payment system, powered by Alipay and WeChat Pay, is almost universal as a result. Even small roadside stalls routinely use digital wallets. A visitor to China soon realises that, back here in the West, we are still incredibly analogue.
What’s more, Alipay is beginning to move beyond its Chinese borders. With a projected 250m active users by March 2020, the Indian population is actively engaging with Paytm (part-owned by Alipay), despite an often fractious relationship between the two nations.
China has managed to be nimble with its digital payments innovation and adoption despite or maybe because of its intervention. In the West, democracies take a long time to agree governance and regulation. Individual companies are making forays but there’s still a lack of cohesion. There’s also huge barriers thanks to a lack of trust - just look at the scepticism over Facebook’s digital currency, Libra, many of whose key partners have abandoned the scheme.
The West is going to need to find a way of building its own cashless framework soon. If it can’t, consumers will gravitate to whatever is available. It's not about where the technology is developed, it’s about making people’s lives easier. If a technology or business provides a way to reduce friction in someone’s life, then consumers will adopt that technology. Also, payment systems are as much about the trust and ecosystem in which they operate as they are about the technology. Increasingly, the rest of the world is starting to see that 1.2 billion people can’t be wrong.
China has managed to be nimble with its digital payments innovation and adoption despite or maybe because of its intervention.
The imperative to develop an answer to Alipay and WeChat Pay goes beyond national pride – the rapid growth of a universal, digital, cashless payment alternative has the potential to supplant national currencies themselves. Even the US has acknowledged this - with Federal Reserve Chair Jerome Powell calling Facebook’s work on Libra a ‘wake-up’ call to the importance of digital currency.
A little history: in terms of the threat to the dollar, the traditional currency system has been previously pegged to the gold reserves. In the Nixon and Reagan eras, they removed the dollar peg to the gold reserves. As a result, now it is not pegged to anything. The relationship between the dollar and gold was disconnected.
When that happened the dollar rose in status - it became the reserve currency for every country in the world. Even China has an estimated $2 trillion held as a reserve, because of its universal recognition around the world and the fact that banking systems are controlled by the West. This, in turn, gives the US a lot of benefits - as long as people hold the dollar, the currency is stable. In a cashless society where the currency is digital, those reserves held around the world will be less meaningful as digital reinvents the global monetary system.
While Alipay is certainly powerful in its domestic market, it has not quite reached the status of a currency, although critically it is tied to the existing Chinese currency infrastructure. It follows that technology has the potential to disrupt the idea of national currency.
I am not predicting that this disruption is just around the corner but it’s clear that as more consumers experience more forms of digital payments, they will increasingly migrate to digital currencies. The West needs a cashless payment mechanism and we can’t assume that we can hold customers back until we’re ready. It is the law of numbers. It is about the ecosystem these numbers create. You attract people by making the experience as frictionless and connected as possible. Then these people will bring more people.
However, approximately a quarter of the global population (1.7 billion adults) do not have or have ever owned a bank account, based on figures by the most recent research from the World Bank Group.
Predictably, the results show that a large amount of the unbanked population originates in countries such as Nigeria, Bangladesh, China, India, Pakistan and Mexico; the developing part of the world. But perhaps unexpectedly, one of the main factors for a significant number of unbanked people in these regions is not always their income level.
Below James Booth, VP, Head of Payment Partnerships EMEA at PPRO, explains further for Finance Monthly.
About half of unbanked adults come from the poorest 40% of households within their economy. Minimal education and high unemployment is only a fraction of the explanation. Account costs regarding set-up and maintenance, as well as the lack of physical accessibility to banks, are major obstacles in many communities.
In Europe, countries like Denmark, Finland, Netherlands, Norway and Sweden have a 100% banked population. But, like any aspect of culture, the population of banked consumers can differ significantly from country to country. Take the Czech Republic, for example, with an 81% banked population and Hungary at 75%.
How is shopping online possible without a bank account?
In 2020, commerce is customer-centric. At a time when any device can become a point of sale, consumers expect a seamless, integrated shopping experience. The shopping habits of consumers – including the unbanked ones – must be taken into account when optimising their experience. A big part of that experience is the way people prefer to pay for their purchase. For example, the number of contactless payments made in the UK surged by 31% in a year to reach 7.4bn in 2018, meaning that the UK remains one of the highest users of debit and credit-based payment methods. However, this is not the case for the rest of the world.
Bank transfers, e-wallets, cash-based payments, and other local payment methods have previously been called alternative payment methods. But they are no longer the alternative; they are the norm for most of the world. According to a Worldpay report, 75% of all e-commerce purchases will be paid for via local payment methods by 2021.
Bank transfers, e-wallets, cash-based payments, and other local payment methods have previously been called alternative payment methods. But they are no longer the alternative; they are the norm for most of the world.
Oxxo, for example, is a cash-based payment method widely used in Mexico to purchase goods online. The shopper gets a transaction voucher from the merchant and then goes to an Oxxo convenience store with their voucher to pay the balance in cash. Then the merchant releases the goods for delivery. Cash-based payment methods are a low-tech solution for the unbanked who shop online. At the opposite end of the spectrum are high-tech payment methods, which continue to grow in popularity alongside increasing rates of internet and smartphone penetration.
57% (4.388 billion) of the world now has access to the internet and a further 67% (5.112 billion) have access to mobile devices, up 100 million (2%) in the past year, according to the latest Global Digital 2019 reports. In Africa alone, there are 444 million mobile users, which enables people, even in the most remote locations, to shop online via e-wallets. These e-wallets are linked to the user’s mobile phone account, which they can top up with cash and use to buy goods and services online.
[ymal]
A growing customer base
Tapping into a new market isn’t the most straightforward task. Nevertheless, it is one that needs to be faced head-on by any business that wants to prosper and grow. Building a positive, smooth experience for customers can be complex, but there is a solution. Third-party payment experts and aggregators can deliver regional knowledge and financial and technical connections on an international scale, partnering with merchants (or their payment service providers) for an easier path to expansion.
The reality of the global population becoming fully banked is still some way off, and we can expect the payments market to become increasingly fragmented. Unbanked adults may still be a relatively small minority, but the gap between the banked and unbanked population is widening. And businesses that adapt to this market have a substantial advantage over those that don’t.
The transaction between Worldline and Ingenico, alongside Atos which is owned by Worldline, comes to together to create Europe’s largest payments company, and the fourth largest in the world.
Reports indicate the overall implied equity value of the buyout deal is EUR 7.8 billion (£6.6 billion), a 16% premium on the existing market capitalisation of Ingenico of around EUR 6.7 billion. The deal also serves to boost earnings per share in either firm and save the new firm around EUR 250 million by 2024.
Still awaiting regulatory approval, the transaction has not come as a surprise in the payments sector, and it should be expected to be finalised by the third quarter of 2020, by which Worldline shareholders will own a 65% majority stake in the new firm, and Ingenico shareholders would take away 35%.
Current Chairman and CEO of Worldline Gilles Grapinet will become solely the new company’s CEO, as Ingenico’s current Chairman Bernard Bourigeaud becomes the new entity’s non-executive chairman.
Here, we’ll look at the components you should include in your marketing plan and how your method of accepting payment can impact your business.
Let’s get started:
Developing a Marketing plan
Effective marketing requires time, money, and preparation. To stay on a budget and schedule when marketing your business, you need to have a marketing plan. A marketing plan involves the steps you’ll take to market your business to potential customers.
Your Business plan needs to include the basic essential elements of your marketing strategy.
Essential Sections of a Marketing Plan
Most marketing plans include these components. As usual, only use what works best for your business.
Market Research
Research is a key component of a marketing plan. You can start by checking with your local library offering market reports. You can even access some library cards online.
Study the size of the market in the industry, customer buying habits, market growth or decline, and other current trends.
Target Market
A detailed market description can help identify your potential buyers. Consider the market size, unique traits, demographics, and demand trends.
Competitive Advantage
Describe what puts your products or services ahead of other products. It could be a lower price, a better product, or excellent customer service. Having eco-friendly certification, or “made in the USA” label, can mean a lot to customers.
Sales Plan
How will you sell your product or service to your customers? List the sales methods you plan to use, for instance, retail, wholesale, or online. Let your customers know each step to take when they decide to buy.
Marketing Strategy
Your marketing strategy will determine whether you’ll reach your sales goal or not. Ask yourself, “how do I find and attract potential buyers?”
Look at the entire market and then come up with specific tactics to use, such as events, email, direct mail, content strategy, social media, couponing, street teams, seminars, webinars, partnerships, and any activity that can help reach potential customers.
[ymal]
Budget
How much do you want to spend on your marketing plan? Here try to be as accurate as possible. You’ll need to track your costs when executing your plan.
Measure and Update Your Plan
Be sure to check how marketing costs compare with generated revenue. You’ll want to ensure you’re getting a good return on investment.
Some tactics, such as word-of-mouth, are hard to measure. So get creative and get advice from other people. The key thing here is to be consistent in measuring the effectiveness of your marketing efforts.
Selecting Payment Methods
Do you know the kind of payments you accept can affect your marketing and sales? Be sure to choose secure, cost-effective forms of payments. Such payments offer a positive experience for your customers. No matter what payment methods you accept, you’ll require a business bank account.
No matter what payment methods you accept,
you’ll require a business bank account.
Credit Cards
To accept debit and credit cards, you’ll need either an account with a third-party payment processing company or a merchant services with your bank.
In addition to the cost of setting the required equipment, you’ll be charged a processing fee for each debit or credit card transaction.
Accepting debit and credit cards can expose you to fraud risk, but most providers offer a certain degree of protection for your business.
Checks
To accept checks, you need to have a business bank account.
To avoid fraudulent or bad checks, you need to develop a policy for accepting checks. For instance, you can decide to only accept checks from in-state banks. Or require checks to include only the validity of given checks by taking a photo of them using mobile banking apps (some banks allow instant check clearance using mobile apps) making the transaction much more fluid.
Checks can not only be used to receive payments from customers, but they are a nifty financial tool for making business payments. The best thing is that you can buy your checks online, thus saving money when reordering business checks. You just need to google online and choose a vendor that matches your needs.
Cash
Some small businesses only accept cash because it’s easy, fast, and inexpensive.
However, this option increases the accounting time and security risk. Be sure to develop a secure way to hold your cash, like a safe and register.
Online Payments
If you run an online business, you have the option of using an online payment service to accept payment through your website.
Typically, online payment services accept debit and credit cards. You’ll be charged a small fee to accept payment online.
Below Christine Bailey, Chief Marketing Officer at international payment solutions company Valitor, explains for Finance Monthly the complexities of valuation and exactly how retailers can determine the value of their stores.
One look around our high streets or news website and you are met with empty stores and articles proclaiming the death of the high street. However, things are starting to change. So it’s time to reevaluate high street stores and put a new price on them.
Price wars with eCommerce
The reality that has existed for some time is that with higher overheads and a smaller inventory, bricks and mortar stores are at too big a disadvantage to compete with eCommerce on price and choice. Smartphones in hand, consumers are quickly comparing online and in-store prices and buying whatever is cheapest and most convenient. Things only get worse with large scale events such as Black Friday. In fact, nine in ten Heads of Commerce believe these sale events have devalued products in the minds of consumers, to the extent that they’re less likely to shop during non-discounted periods.
In order for brands and retailers to effectively revalue their stores, we need to understand what physical stores can offer and online cannot. Firstly, bricks and mortar have a clear lead with personalising the customer experience. By blending their online and offline setups together, omni-channel retailers can dramatically improve the customer experience
By blending their online and offline setups together, omni-channel retailers can dramatically improve the customer experience.
Offering more than quick sales
For instance, physical stores can benefit an omnichannel retailer via its unique strengths, including in-person support, simple returns, and the ease of payments. In fact, recent research found that almost one in five (19%) retail executives think the top hidden strength of the high street is its people. Assets like in-person support then should not be overlooked. Together, these strengths contribute to a robust in-store customer experience, which may not translate into a sale being made at the store itself, but can support online sales, or reinforce the brand.
Taking this further, there are other elements that omni-channel retailers also need to take advantage of. Embracing an experiential approach and putting customers at the centre of a physical brand experience is key to revaluing physical stores. Through shifting their focus from selling products to the people purchasing them, brands can connect with consumers on another level and start building long term relationships.
One great example and leader in this area is Nespresso. By focusing on consumer needs, Nespresso’s stores showcase its products in an immersive way, creating a multisensory experience. Staff add to this with expert knowledge and can take customers from the physical point of sale all the way to a personalised subscription plan which is then facilitated via its app. So although purchases are made via the app, the physical store has a major driver in securing the sale in the first place and providing an experience centre to push new products and flavours.
[ymal]
Nespresso’s customers now no longer see its stores as just a place to make purchases. Instead, they have become destinations that they want to go, all of which helps build a positive connection with the brand and support the development of a long term relationship. This type of store usage can be replicated quickly and easily by other brands too. What is crucial is having a physical presence that aligned to customer needs.
In the future we may see innovative technologies such as VR and AR also being used, shifting shoppers’ experiences from simply browsing, to immersing themselves in a brand’s offering. But, retailers need to understand it before they invest in it. Crucially, brands also need to identify whether their customers are actually interested in it and see benefit in using it, prioritising their wants and needs.
In this high-pressure era of retail, stores should not be valued purely on revenue anymore. Instead, they should be viewed as a way to complete true end-to-end experiences from first engagement through to the next purchase. Ultimately, this will increase customer retention and the value of each transaction too. While revenue is an ever-important consideration, the ways customers make purchases has changed. This does not mean the value of stores has disappeared. Instead, brands and retailers need to look at how a physical stores advantage can be used to improve the omni-channel experience.
For $5.3 billion, Visa has agreed to acquire the Silicon Valley start-up Plaid, a firm that is already backed by huge tech investors such as Mary Meeker and Andreessen Horowitz as well as Goldman Sachs. It was valued in 2018 at $2.65bn and is now already worth twice as much.
For visa, this transactions means a deeper push into the ever-growing fintech sector, particularly after is bought a minority stake in Klarna in 2017.
Plaid is a software provider that enables other fintechs and payments services to access customer bank accounts and details, enabling smoother handling of information for financial planning apps, money transfer apps and so forth.
Al Kelly, chief executive and chairman of Visa, said: “This acquisition is the natural evolution of Visa's 60-year journey from safely and securely connecting buyers and sellers to connecting consumers with digital financial services.”
“The combination of Visa and Plaid will put us at the epicentre of the fintech world, expanding our total addressable market and accelerating our long-term revenue growth trajectory,” he continued, according to the FT.
Reporting on the agreed acquisition, Forbes fintech expert Jeff Kauflin believes Visa is strategically acquiring plaid for the sake of its relationships and partners: “Plaid’s 2019 revenue was between $100 and $200 million… Visa would be paying a sky-high price of 35 times sales, one of the highest price-sales multiples in recent history for a private company.
“Visa’s primary reasons for buying Plaid are twofold. First, Plaid works with the vast majority of the largest fintech apps in the US, including Venmo, Square Cash, Chime, Acorns, Robinhood, and Coinbase. With the acquisition, Visa gets access to an important, ballooning base of customers that it can sell additional payment services to. Second, Visa has a global network that’s unparalleled in financial technology, with millions of customers across 200 countries. That will make it much easier for Visa to take Plaid global.”
On the other hand, Stefano Vaccino, founder and CEO of Yapily, believes that this is just the first of many moves by card operators, in anticipation of the changes to the way we pay, powered by Open Banking: "It’s great to see big players positioning themselves in the world of open banking and open finance, this will help to accelerate the sector’s growth even further.
“Card payments are expensive for merchants to process, and with two-factor authentication on its way in the second part of this year, there will be an increased layer of friction. Payments through Open Banking will offer a smoother and more secure way to pay, and will provide an opportunity for merchants to decrease costs and transfer these benefits to consumers.
“This space will be disrupted hugely as the possibilities of open finance are realised, and incumbents must innovate to remain relevant.”
Generation Z growing concerns
Having grown up around the threat of cybercrime, those in Generation Z appear to be more aware of the risks of fraud than millennials (born between 1981 and 1994). Our research found that nearly three-quarters (74%) of 16-24-year olds believe it is too easy to find someone’s personal information online nowadays. On top of that, more than half (52%) of Generation Z are worried about someone stealing their identity.
While observing a focus group of 18-24-year olds held to support our research, I noticed a high level of awareness about banking and online security from the respondents. Many of the young consumers showed that they don’t just install the latest banking apps simply because they are new or cool. They are considered with their consumer decisions and assess how well services or technologies fit their security and financial needs, prior to acting.
One respondent, Nikki, who is 24 and from London, stood out for rejecting mobile payment apps, the opposite of the perceived image of someone in Gen Z: “I only use my bank card to pay for things,” she said. “I deliberately keep my phone separate because I don’t want spending money to be too convenient.”
Do banks still have our trust?
Like Nikki, many Generation Z consumers are more cautious while banking or shopping than retailers and banks may realise. Our research shows that, far from being over-sharers of their personal information, more than three-quarters (76%) of Generation Z accept that it’s their responsibility to look after their data and keep their identity safe. In return, these consumers expect their banks and service providers to work just as hard to deliver a high level of protection for them.
Although new challenger banks, such as Monzo and Starling, are growing rapidly among young consumers, that doesn’t mean Generation Z trust them more when it comes to security than the high street giants.
Although new challenger banks, such as Monzo and Starling, are growing rapidly among young consumers, that doesn’t mean Generation Z trust them more when it comes to security than the high street giants. Michael, a 19-year-old student from London also in the focus group, summed up the care with which Generation Z approach digital banks: “I feel the online banks have to push up their security because there’s no physical presence”, he said. “So they’ve got to be more secure to be on top of their game.”
Our study also reveals a wider lack of confidence in all banks, as only half of Generation Z shoppers (54%) are certain that their bank would refund them any losses if someone fraudulently accessed their bank account and stole any amount of money. The new generation of banking customers want to see even greater security and responsibility from high street banks, which in turn is driving their consumer choices.
A modern solution for a digital world
The findings also show that Generation Z wants to see banks adopting new technology to combat card and online fraud. Nearly two-thirds of them (62%) think all banks should offer biometric payment cards to help reduce fraud.
Additionally, nearly half (45%) of Generation Z can’t believe credit and debit cards don’t already use biometrics for payment and ID security. Again, this is even higher among 16-17-year olds, with nearly two-thirds (63%) of them expecting banks to already use biometrics for payment card security. As high street banks often thrive on signing-up new customers while they are young, appealing to this new generation of consumers is vital for the industry.
Therefore, financial institutions must now add biometric technology to the payment card market to attract young customers and grow loyalty with them. In fact, nearly half of those in Generation Z (46%) would choose a bank that offered biometric payment cards over one that didn’t.
Most importantly, Generation Z consumers are willing to pay for added security as two-in-five (43%) would expect to pay a little more for a biometric payment card, with a third (33%) willing to pay between £3-5 per month for it.
The time to act is now
As Generation Z will soon create a large proportion of banks’ customer bases, it is imperative for the prosperity of the banking industry that these security needs are not ignored. If high street banks remain slow to respond to the demands of Generation Z and fail to address its security concerns, they will soon be surpassed by digital challengers who are able to revolutionise the system faster.
It has become increasingly clear that under 24-year-olds are now expecting to be using innovative and secure biometric technology for improved payment security and convenience. Banks now hold the responsibility to make this change as soon as possible. The introduction of new biometric payment cards will entice younger customers, protect users from fraud and encourage continued faith in consumer banking.
The global growth of money transfers
Some 270m migrant workers will send $689bn back home this year, according to the World Bank. This figure is a landmark moment. Global money transfers will now overtake foreign direct investment as the biggest inflow of foreign capital into developing countries.
Global transfers are also now well ahead of private capital flows and foreign aid, the third and fourth largest inflows of capital to emerging economies respectively.
In some countries, global money transfers now constitute a third of the total GDP. The most popular destinations for these transfers include India, China, Mexico and Egypt, according to the World Bank.
Moving money changes lives
Very often these money transfers are life-changing for those that send or receive them and for the communities in which they live. Money earned in the UK goes further in emerging economies.
The money might go on funding everything from basic food and housing costs to medical bills and education for children.
Rather than simply acting as a ‘hand out’, research by the International Fund for Agricultural Development shows that money sent back home creates independence and sustainability.
Funds may provide the seed money for small enterprises and family business. They generate economic opportunities for women, which would not otherwise exist.
The World Bank also believes that money transfers are encouraging the development of greater financial skills in developing countries with recipients more likely to own a bank account.
The World Bank also believes that money transfers are encouraging the development of greater financial skills in developing countries with recipients more likely to own a bank account.
What’s led to this growth?
The dramatic rise of global transfers in recent years is down to a range of factors.
First, the number of people in the world who now live outside their country of birth has risen from 153m in 1990 to 270m last year, according to the World Bank.
As migration has increased, so global money transfers have swelled from a trickle to a flood. This flow of private, informal and personal capital has become one of the defining trends of globalisation of the last 25 years.
Second, advances in technology are making it easier to send money abroad. What was once a laborious, slow and expensive process to move money across borders is now simple, quick and low cost.
Money transfers once depended on physically entering a bank and arranging for someone to collect the cash at the other end. Technology, such as Paysend’s card to card transfer service, Global Transfers, now enable consumers to send money directly from one card to another with the tap of an app.
Money can now move around the world almost as quickly as it’s earned. Family members back home will receive money in an instant.
According to a 2018 UN report, the average global transaction cost is 7%. However, FinTech start-ups have reduced to well below 2%. On a transaction of £1000, this saving can represent an extra two terms of primary school fees in some developing countries. Paysend charges a transparent fee from just £1 per transaction, which represents a sensible difference against more established systems.
What’s the impact?
Global money transfers are now the “most important game in town when it comes to financing development”, according to Dilip Ratha, the head of the World Bank’s global knowledge partnership on migration and development.
Beyond the movement of money, global transfers are having an impact on the way people live their lives.
First, people increasingly want to live life without borders. According to a BBC World Service Poll in 2016, 56% of people in emerging economies see themselves as global citizens first and foremost.
Second, financial inclusion is increasing. The World Bank’s 2017 report ‘Measuring financial inclusion and the FinTech revolution’ shows that money transfers are encouraging new financial management habits in the developing world. Many people will seek financial products for the first time.
Third, where FinTech leads others will follow. PwC reports that the majority in the banking sector believe at least some part of their business is under threat by the FinTech revolution.
At Paysend we’ve been at the forefront of these developments. We have been helping more than one million customers transfer money to more than 70 countries worldwide safely and with minimal fees. We grow each day as more people use our service for instant and flat-fee transfers around the globe.
Because moving money change lives, it’s vital we do all we can to make paying, holding and spending money as simple, quick and low cost as possible.
In doing so, we’ll ensure that more of consumers’ money is enjoyed by those they care about.
Sources:
https://data.worldbank.org/indicator/BX.TRF.PWKR.DT.GD.ZS
http://documents.worldbank.org/curated/en/590441468285573286/pdf/WPS6157.pdf
https://ig.ft.com/remittances-capital-flow-emerging-markets/
https://en.unesco.org/gem-report/sites/gem-report/files/GEMR_2019-GEMR_Summary_ENG-v6.pdf
https://www.bbc.co.uk/news/world-36139904
https://www.pwc.com/gx/en/financial-services/fintech/assets/fin-tech-banking-2016.pdf
These intermediates a source of funding that consents to pay the business of the value of an invoice after a deduction for commission and fees. The agent pays most of the invoiced value to the company directly and the surplus upon receipt of the balance of the invoiced company. There are three individuals directly included in a transaction: the Factor, who buys the invoice, the seller of said receivable, and the debtor, the company, or individual who must clear the debt attached to the invoice.
How these intermediaries or agents works
A factor enables a business to obtain direct capital based on the expected income attached to a particular sum due on a business invoice or an account receivable. Accounts receivable (AR) are a history of money clients owe for sales performed on credit. This permits other interested individuals to buy the funds payable at a reduced price in exchange for granting cash upfront. This whole process is referred to as factoring. An important thing to note is that it is not considered a loan, as the individuals neither issue, nor obtain debt as part of the action. The money provided to the firm in exchange for the accounts receivable is likewise not subjected to any limitations regarding their use. The requirements set by individual agencies may differ depending on their internal policies. Most of these transactions are done through a third-party financial institution, known as a factor. These brokers often free funds connected with newly acquired accounts receivable inside 24 hours. Repayment terms can differ depending on the cost involved. Besides, the portion of funds given for the particular invoice, this is referred to as the advance rate.
While there are numerous reasons why companies choose to use to sell their invoices as a business instrument. Here are some of the key advantages that most of these agencies firms provide:
Provide quick access to cash
When you render a product on credit, it is reasonable to wait more than 30 to 90 days on client payments. That process can lead to cash flow difficulties. Agents will offer an advance on any invoice, and this is often provided within a day. This immediately raises cash flow, enabling you to add workers, buy supplies, and meet other expenses that accommodate companies to meet demand.
Accelerated growth
Using the option of gaining finance by using your account should offer a firm the versatility and ability to grow at a more accelerated pace that is self-financed or dependant on loans. Additionally, using a factor is also a straightforward process to set up. But, instead of shopping for a conventional bank loan, you can start an account in days. Unlike standard banking terms, there is little limit to the amount of finance from one of these companies that has a robust capital structure.
Free up valuable time
Collecting cash from clients can be demanding on your company’s time and expenses. These businesses take over that position providing collections professionals who will attend to your clients until they pay the full amount owed. Many of these factors also offer online services that enable you to follow real-time customer repayments. Freeing up valuable time for you to continue to serve customers, seek out new business opportunities, and not have to worry about chasing money owed to you.
Fees and Terms
Before you enter into any agreement, you should pay close attention to all the terms and conditions of the contract. Unfortunately, these fees can vary considerably depending on the firm and the industry you are in. Some of these businesses only charge a straight fee, usually a percentage of the full value of the customer invoices. Other firms charge extra fees that cover capital transfers, transportation, insurance, and other expenses attached to doing business.
Experience in critical
It is essential that you find a business that has expertise in your industry and the capital necessary to continue to fund your company as it expands. Building a relationship with a factor could prove to be vital to the success of your company in the long term. Be careful not to choose a small firm, as they might not have the capital you need down the line to service your needs. Do your research before deciding.
Fund expansion
Most companies need to obtain finance to expand. But with a limited financial history, sometimes it is difficult to get the required financing. Unless you possess a reliable cash flow statement, most standard financial institutions will not even consider you for cash flow or asset-based finance. Most of these firms do not operate on the same terms; they will finance you primarily based on your company's credit history.
Find better customers
Over time, if you build a strong relationship with a factor, they have access to information on companies who may become your customers. They can tell you who to approach and, more importantly, who to avoid. This can save invaluable time and money.
[ymal]
No debt incurred
Any agreement made with a factor is not a loan, you are merely financing your business through already accumulated invoices, any obligations are settled once your customers pay their debt in full. This is a huge advantage for smaller businesses who might already be overburdened with debt.
There are many more benefits to choosing to factor than just the ability to increase your company’s cash flow. The vast majority of factors will handle collections on your behalf, pursuing customers for their overdue invoices. Not only saving you both time and money as mentioned earlier, but it also gives you peace of mind.
One potential stumbling block will be the creditworthiness of your clients. A factor is more concerned with the ability of the invoiced parties to repay their debt than your company's finances. We understand that using a factor is not the most affordable form of financing, but it has proven an invaluable resource for many companies. Especially those who have chosen to operate in a field where clients are notoriously slow at concerting their receivables. Instead of waiting they focus on rapid expansion and using the increased profits to offset any expenses incurred.
If you bought property while living abroad for a few years for example and did not want to immediately sell up, you could test the water to see if any tenants may be keen to occupy it as you move back home. Furthermore, you may have purchased a holiday home and renting it out may be more advantageous than ultimately leaving it empty for months on end.
Of course, there are many things to consider once you do decide to establish a rental business, with a key one being just how you will receive rent. Here we have pulled together three different approaches you could take on the matter as you look to make a little bit of cash from your property interests.
1. Post-dated cheque
As AccountingCoach.com explains, a post-dated cheque is essentially a cheque which is written out and includes a date in the future on it. When it comes to paying rent, a tenant would agree with a landlord that the cheques in question would not be cashed or deposited until after the date which is stipulated.
The use of post-dated cheques is quite common in a number of areas across the world. For example, as this property website explains, it may be something people come across if they are looking for flats to rent in regions such as Sharjah. The practice of making rental payments through four to six post-dated cheques is used often in the area, which borders Dubai and has become a popular option due to its affordable rents when compared to the neighbouring city.
2. Online payment platforms
A more modern approach to the issue of rent payments may be to accept online methods such as PayPal or more specialist services. Payments through such services tend to be processed very quickly, while a major benefit is that their use is common across the world.
For example, as this website outlines, there are a host of online rent payment services available for landlords with property interests in the US. The likes of Cozy, Avail and PayYourRent include a range of features designed to ensure payments are received swiftly and easily.
3. Bank transfers from a local account
Alternatively, you could simply ask tenants to transfer rent from their bank account into one which you have established in the country or region where your property is based. The method is popular in many areas and, as this website explains, is commonly used to pay rent on property in Spain.
This may be a straightforward step to take as it would mean there could be the option of direct debits and standing orders too. However, that approach would, of course, mean you would need to manage and decide on how you access those funds, which would be held abroad.
Remove stress and concern
Renting out property can be a real money-spinner for those who are fortunate to have homes in a host of desirable and in-demand locations. Furthermore, having access to the right payments can help to take a lot of stress or concern out of managing or owning such properties.
The approaches listed above should hopefully give you some ideas on how you could address this issue as you get started with your own rental business.
The analysis suggests that businesses typically agree 45-day payment terms from completion of work or delivery of goods. Despite this, almost two-fifths (39%) of invoices issued in 2019 (worth over £34b) were paid late, an improvement on 2018 when 43% of invoices were paid late. However, the number of days an invoice was paid late in 2019 has doubled to 23 days from 12 days in 2018. Invoices paid late were typically larger in value (£34,286) than those paid on time (£24,624).
Long payment vs Late payment
There is a distinct difference between these terms. Long payment terms refer to the time contractually agreed between parties when invoices will be settled for goods and services provided. Whilst sometimes lengthy, they are a reality of doing business. Businesses can plan to cover these cash flow gaps and manage their working capital using either cash reserves or finance tools like invoice finance. Late payment refers to the additional time taken to settle invoices, outside of those contractually agreed at the point of purchase. This is an unknown and unexpected element which can significantly impact cash flow, business plans and even in some cases paying staff or creditors.
Bilal Mahmood, External Relations Director at MarketFinance, commented: “It’s great to see that fewer invoices were paid late in 2019 but worryingly, those that were paid late took twice as long as in 2018, up from 12 days to 23 days. Late payment practices harm business cash flow, hampers investment and, in extreme cases, can risk business solvency. Separate research we’ve conducted highlighted that 87% of businesses are prevented from taking on more orders because of the cashflow constraint owing to late payments. Overall it seems who you are doing business with and where they are based is important to know for a small business if they need to forecast cashflow”.
“Government measures such as the Prompt Payment Code and Duty To Report have helped create awareness but need more bite. Until this happens, there are ways for SMEs to fight back against the negative impact of late payments, from having frank discussions with debtors that continuously fail to adhere to agreed payment terms, to imposing sanctions on those debtors, or seeking out invoice finance facilities to bridge the gap.”
Sectors
Professional and legal services businesses suffered the most with late payment in 2019. Seven in ten (70%) of invoices were paid late, up from 30% in 2018. Manufacturers (57%), retailers (49%) and creative industries businesses were also heavily impacted by late payment of invoices. Interestingly, late payment practices improved for companies working in the utilities and energy sector with only a third (34% of invoices being paid late in 2019 compared to two-thirds (66%) in 2018.
Regions
The number of invoices paid late to companies by region was fairly evenly split. Notably, businesses based in the South East (56%) and Northern Ireland (55%) had the highest number of invoices paid late in 2019 and late payment practices worsened from the previous year.
The biggest improvements 2018 vs 2019 in late payment practices were in North West (63% vs 37%), North East (60% vs 40%), Scotland (62% vs 38%) and the South West (61% vs 39%). Additionally, businesses in the North East (25 days vs 11 days) and South West (33 days vs 10 days) had more than halved the number of days an invoice was paid late.
Countries
The analysis looked at invoices sent to 47 countries by UK businesses. US companies were the worst late payers, taking an extra 51 days to settle invoices from agreed terms in 2019. German firms took a further 32 days and businesses in China took an additional 10 days. Interestingly, French, Spanish and Italian businesses halved the number of days they paid late from 24 days late in 2018 to 12 days in 2019.
Bilal Mahmood added: “SMEs owners have come to expect long payment terms but late payments are inexcusable. For every day an invoice is late, it’s more time spent chasing payment. This means less time for business owners to focus on growing their business, coming up with innovative ideas and hiring more people, or just paying their staff and bills. Things need to change quickly.”
“We want the UK to be the best place in the world to start and grow a business, but the UK’s small-to-medium-sized businesses are hampered by overdue payments. Such unfair payment practices impact a business’ ability to invest in growth and have no place in an economy that works for everyone.”
