You probably didn't want to be a cog in the machine of a large corporation, so you started a small to medium-sized enterprise (SME) with a lot of enthusiasm and experience in the business world. You were convinced that if your company offers good enough products and services, you would be inundated with customers and cash flow.
Not long after, you found that word of mouth did not necessarily convert to customers, and that even if you had a big client on your doorstep, it was not uncommon to have the opportunities slipping away. Large orders. For example, a client might not be able to pay via your company's single collection method, your company might not be able to provide the proof of company bank account requested by the client, or you might not be able to handle large orders from new clients because of the cap on your personal bank account or collection method used to handle company accounts. Ultimately, the limitations of your financial operations meant that you couldn't make a lot of money even from your many customers.
Even if you had finally signed a contract with the client, it only implied that you were ready to face another challenge - "payment collection". It’s the most important lesson for business operators to learn how to collect money from their clients in a reasonable and polite manner without being overbearing. While large corporations could easily take their disputes to court, for SMEs, “payment/debt collection” could become an uncomfortable but unavoidable task.
Three major problems for SMEs in “payment / debt collection”
As the saying goes, “no money no talk”. Many personal service providers (e.g services ranging from legal advice, copywriting, corporate solutions, etc.), intermediaries (e.g. design, PR, logistics, warehousing companies, etc.) or SMEs of all kinds are accustomed to start working only after receiving payment. However, the mode of cooperation and settlement between these companies and their clients is usually dividing the service fee into a deposit and a final payment/balance. Even the deposit will be divided into a down payment or a further deposit, and the client will pay the relevant part of the payment according to the progress of work or a specified date.
Therefore, once the SME has received the down payment or deposit and started working, the "reincarnation" of "payment / debt collection" has officially begun. There are in general three types of "payment / debt collection" problems.
1. Payment terms are unclear
Unlike large enterprises, SMEs usually do not have a legal / compliance department to draw up strict contracts before they start working with the clients. In the end, the terms and conditions of cooperation with the client will probably only state when the deposit is to be made. As for when the client has to pay for the further deposit or the final payment, it is either unspecified or unclear, for example, the client can settle the payment until he / she is "fully satisfied". In the end, the client may make repeated excuses and there is nothing the SMEs can do about it.
2. Cooperation depends on attitude
Another problem that sometimes arises from the simplicity of the above model is that the same staff of a department may follow up on everything from negotiation to service delivery to "payment / debt collection". In the event that the agreed payment deadline has been reached while payment is still pending, the company may be embarrassed to have to "chase" the debts or even simply settle the matter for the sake of maintaining a cooperative partnership, turning part of the payment into a bad debt, though they have all the reasons to do so.
3. Collections can be uncertain
In the event of a “bad debt”, it can be dealt with directly by the law. However, the most common scenario is not missing the final payment, but that the final payment does not come in as expected. Sometimes the customer will keep playing dumb and adopt a delaying tactic to settle the final payment. There are also customers who, due to account mismanagement or turnover problems, keep suggesting or changing to other ways of settling the final payment, such as paying by credit card instead of the agreed bank deposit, where the company has no choice but to suffer the inconvenience in the end.
Systematic collection via the system
When faced with the complex and tedious task of “payment / debt collection”, some individual businesses or SMEs may bear the costs to increase their manpower budget and hire legal advisors or accountants to handle it. In fact, in today's online world, many online systems can already take care of this important "assembly line" process. Reap Collect, for example, is one of the most popular online collection platforms for SMEs.
Through Reap Collect, SMEs can allow their customers to settle payments by the most popular payment mode - credit cards. The benefits of Reap Collect are summarised as follows:
- There is no limit to the amount you can receive, so it can be used as a direct replacement for a company bank account for business purposes
- All receipts can be easily and clearly tracked, categorised and managed
- There are no hidden fees
- Easy to accept payments from overseas customers by credit card online, regardless of location
- Credit cards offer a longer interest-free grace period for customers, making it easier for customers to turn around and generate businesses
Brand new feature - one-step collection of the balance of your deposit
Reap Collect has recently introduced a brand new feature that allows individual businesses or SME users to set up their own collection arrangements for the deposit and balance. The key steps are as follows:
- Login to your Reap Collect account.
- Add a “Collection Item”.
- Click on “Collect deposit, instalment or subscription fee”.
- Divide the receivable into different deposit or instalment components in the form
(you can set a specific amount or percentage of the total for each instalment).
- Set a due date on the form for each instalment or final payment.
- Complete the production of collection invoices and send their links to the customer.
- Obtain customer’s order confirmation as well as customer’s understanding and agreement to the subsequent overdue or final payment arrangements through the link.
Whenever a payment or balance is due or a job is completed, Reap Collect users can click the “Collect” button directly on the relevant invoice, instructing the system to debit the customer's credit card account directly and the customer will receive an email notification for payment confirmation.
Benefits of electronic financial management
In the modern business world, a "black and white" systematic cooperation is always better than mutual suspicion and accommodation. The above example of receiving the final payment directly through the system eliminates the embarrassment and inconvenience of manual chasing and is definitely the ideal financial management model in the online business megatrends today. In fact, both Reap and other e-banking platforms offer one-stop e-financial management services, ranging from collection, payment and management of accounts, all at a glance, all in one go, providing unparalleled efficiency and convenience to catch up with the pace of business in the new generation.
Get started on the road to success with Reap Collect to optimise your e-financial management today.
