3 Payment Management Mistakes and How to Solve Them
It's safe to say that the main goal of every business is to generate a solid profit. However, a successful business is more than just selling a product or a service; in order to truly thrive, the business must be successful in all aspects, including when making business payments.
However, between manual data entry, multiple forms of payment, and manual reconciliation, making business payments can quickly become a monotonous task that exposes the company to risk and human error. Payment management mistakes can be quite costly, but through careful planning and learning what to avoid, you can save time, money, and labour.
Mistake #1: Forgetting non-monthly payments
The most serious consequence of not using automated payments is that non-monthly expenses are at risk of being forgotten. It's easy to keep track of and budget for the expected monthly expenses, but often, the non-monthly expenses are forgotten (or paid late). Depending, of course on what exactly your non-monthly items include, the costs to your business could be high. In some instances, you may find yourself having to pay a fee as a result of the missed payment. Another impact that could badly impact you is that you could lose the client, effecting both your income and reputation.
Tip: Instead of being surprised once a year with an annual bill for a particular expense, make monthly "payments" on this expense year-round. For instance, imagine your business must make a £1,200 payment every June. Instead of struggling to find the £1,200 on May 31, pay yourself £100 each month as a monthly "payment" for this expense. This method will keep the expense fresh in your mind and lessens the risk of forgetting to make the payment all together.
If you’d rather take on board another technique, then using an automated payment system is a must. This will take care of all of your payments for you, meaning you needn’t be concerned about forgetting. Read on for more details on the benefits.
Mistake #2: Manually processing each payment received or requested
Failing to use automated services for your accounts puts your business in direct risk of error. A simple number mistyped or omitted can be costly for a business or, worst case scenario, it can lead to overdrawn business accounts. Implementing an automated reconciliation system ensures that your accounts are reconciled properly.
Further, manually processing each payment is a costly choice. Imagine you hire an employee to process each payment, and your employee must make 1000 payments per month. If the employee spent even a mere 90 seconds on each manual payment, s/he still averages about 25 hours per week simply making payments.
Tip: Opting to use an automated bacs payment system significantly reduces the amount of time needed to make your payments. Not only does Bacs reduce the length of time for this task, but it also reduces the chance for errors and the labour cost of manual processing.
Mistake #3: Not using direct debit collection for collecting payments
While Mistake #1 refers to outgoing payments, this mistake refers to collecting payments. Not using direct debit collection can cost time and money. Imagine a master photographer who created a monthly subscription where clients receive templates and how to videos. The master photographer has 100 subscribed clients, but each client's monthly fees are due on different days. That means the master photographer must make multiple payment requests and consequently pay a bank file charge for each batch.
Tip: By utilising a direct debit collection service, the master photographer only needs to make one monthly payment request, which saves time, money and bank fees.
These three common mistakes cost business owners time and money and only lead to frustration. By controlling your monthly expenses, integrating a bacs payment system and implementing direct debit collection, your business will be placed in a much greater position for success.
