In the business world, time is money. The faster you can pay your suppliers, the more time you’ll have to focus on more important things — like making money. Here are nine ways to streamline supplier payments and get the most out of your business’ cash flow.
1. Be Clear About Your Terms
Before you can come up with a strategy for getting paid faster, you need to be clear about your terms. What method do you require of suppliers? For example, most credit cards accept 2-3 business days of processing.
If your supplier chooses not to pay by card, how long are they willing to wait before payment is overdue? 30 days? 60 days? 90 days? Talk things out and set the terms together.
2. Get Paid Faster with Credit Cards
Accepting credit cards allows your customers to pay more quickly than with cash or checks (given that most shipments are placed online).
Depending on the size of your purchase, some suppliers will let the customer choose whether the credit card company processes transactions within 24 hours or will let it go through a week later.
3. Stop Paying Interest on Past Due Invoices
Years ago, companies used to pay interest on any invoice that was not paid within terms (usually 30 days).
Now, most businesses no longer pay interest and instead work out payment plans with suppliers when necessary (usually paying half up front and the rest in installments each month until the balance is settled).
4. Improve Your Collection Tactics
Just because your business doesn’t pay interest doesn’t mean you shouldn’t be collecting money owed to you! Take the time to:
- Call suppliers: Ask for outstanding invoices and settle them as soon as possible. Many times, creditors are willing to reduce their balances if they know you’re serious about paying them back.
- Send a polite reminder: A short letter can often do the job of a phone call — and it doesn’t cost nearly as much. If payment still isn’t received within 30 days, follow up with another billing statement that includes late fees or interest charges.
5. Take Control of Payments from Customers
If your business has been on the receiving end of past due invoices more than once, consider creating an invoice specifically for customers who need terms (e.g., “Net 15” indicates that if full payment is not made within 15 days, a 2% late fee will be applied).
This requires extra work on your part but can save you time and stress in the long run.
6. Look into Alternative, Efficient Ways to Pay Suppliers
Do you know about efficient ways to pay suppliers? Have you looked into:
- ACH (automated clearing house) transfers: These allow companies to wire money directly from their bank account to a supplier’s account at the push of a button — and there’s no charge unless there’s an error.
- Virtual Prepaid Cards: These cards allow businesses to load as little as $100 onto a card and transfer the balance from one business to another. This is an easy way to pay suppliers without using cash, checks, or even credit cards.
7. Be Flexible About Payment Methods & Terms
There is no perfect way to get paid faster by suppliers, so try different options and see what works for you. Some businesses even use multiple methods, like accepting credit cards but also sending out invoices with terms to customers who require them.
What’s most important is that your business can actually afford the method you choose — time is money, after all.
8. Consider Outsourcing Your Supplier Collections
If you’re still having trouble collecting overdue invoices, consider outsourcing your supplier collections. This can be done in-house or by hiring a third-party company.
Having another set of eyes go after unpaid receipts can make all the difference when it comes to improving cash flow.
9. Get Paid Faster with Automated Invoice Factoring
Invoice factoring is an innovative way for any business — even startups — to get paid faster by suppliers and increase their cash flow quickly.
Rather than waiting 30 days for payment for services provided, invoice factoring enables businesses to receive funds at once by selling their outstanding invoices (and sometimes accounts receivables) directly to a financing company.
In the business world, time is money. The faster you can pay your suppliers, the more time you’ll have to focus on more important things — like making money. Here are nine ways to streamline supplier payments and get the most out of your business’ cash flow. We’ve outlined a variety of methods that will work for any type of company, so find the tips that work best for you and start getting paid faster!