Cash flow is a company’s lifeline, especially in uncertain economic times. Businesses that accommodate a variety of payment options will win over more customers and increase the likelihood that they’ll be paid faster. Yet to fully maximize cash flow, companies must also reduce their DSO and minimize costly exception items.
Tip 1: Provide More Payment Options
Customer expectations are rising, and a positive customer experience is crucial for retention. The more payment options you can offer your customers, the better. This goes beyond credit cards, wire transfers, debit cards, checks and ACH transfers.
The use of digital wallets like Apple Pay and Google Pay is becoming increasingly common. More than two–thirds of Americans expect to have a digital wallet within two years, according to a survey last year by McKinsey & Co.
Remove any payment 'friction' from your merchant portal by using a system that lets your customers pay on their mobile device, via text message, digital wallets or online.
Tip 2: Reduce DSO
Think your company is doing the best it can to ensure customers are paying in a timely manner? Your DSO, or Days Sales Outstanding, might tell a different story. That’s the average number of days it takes for a company to receive payment from a sale or service rendered.
A business with a high DSO is typically experiencing lengthy delays getting paid by customers. So, anything that lowers DSO is good for business and a sign that the company’s cash flow is healthy.
Providing more payment options will help you reduce your DSO, as will invoicing immediately. An automated payment solution can also help cut down your company’s DSO by streamlining invoice management. This starts by speeding up payments and eliminating the lengthy processing time associated with paper checks.
Offering your customers payment options that they’re comfortable with, including self–service capabilities, also provides convenience and minimizes hassle to encourage on–time payments.
Tip 3: Minimize Exception Items
One red flag to watch out for: An inordinate amount of exception items, or payments that fail to be fully processed.
This can happen due to relatively simple mistakes like a typo on a check or a missing signature, though errors with credit cards, ACH transfers, lockboxes and other types of transactions can also end up as exception items.
An automated payment processing provider can minimize the occurrence of exception items by reducing human error and quickly identifying and correcting any issues. For example, DocuPhase’s form–based online portal prevents avoidable errors that can hold up the payment process by alerting the user when fields need to be corrected before the submission will go through.
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