Social distancing, which has become a temporary way of life for many of us, creates unprecedented business challenges for companies of all sizes. Many businesses must adapt their business models to remain open. For example, dine-in restaurants are now takeout only and offices are now operating from their employees’ homes. These are just a few examples of how business owners are getting creative to remain profitable.
As businesses find innovative ways to remain operational during these challenging times, one thing has remained the same, and that is that businesses need to get paid for the work they do.
Challenges of Collecting Receivables During the Pandemic
Businesses typically email or mail invoices to their customers who often pay via check, ACH, credit card or wire. Then someone in the accounting department reconciles the payment with the correct invoice, which is often a manual process.
Now that most businesses are operating from their employees’ homes, there are some new challenges with collecting receivables. The first is that it’s difficult for businesses to receive payments via check due to COVID. Checks often need to be physically deposited at the bank, especially if they are over the amount allowed for mobile deposit. Checks still account for 42 percent of B2B payments, according to a 2019 AFP Electronic Payments Survey.
Getting the check from the customer may also be problematic. Should the customer send checks directly to your home or are you still driving into the office to pick up checks? Manually processing a check may also be difficult for your customer right now given the circumstances. Additionally, reconciliation may be more difficult if several people over multiple locations are involved in the process.
Another big challenge right now is getting paid, period. Many businesses have unfortunately had to close their doors or are struggling financially. This may mean that some of outstanding invoices may not get paid. To help overcome potential missed payments, it’s important to stick to best practices, such as requesting upfront payments with new customers and then placing them on payment terms once a relationship is established.
Implementing Electronic Receivables
At a time like this, it’s important to make it as easy as possible for customers to pay you in a safe and convenient way, which is where electronic payments offer a huge benefit. One of the easiest ways to get away from checks is to look into other payment methods like ACH and card. There is typically a small cost associated with receiving a card or ACH payment but it’s important to think about the long-term benefits and efficiencies of electronic payments when weighing the pros and cons.
If you have a customer who previously paid by check, communication is key. You can tell your customers that due to Covid-19 risks, you would appreciate being paid electronically. By stating why you’d like them to switch and guiding them through how to do so, you make it easier and safer for everyone.
Benefits of Electronic Receivables
Not only are electronic payments safer but they are more secure. If someone mails you a check, there is always a chance that the check won’t clear. Additionally, checks often have a higher risk of fraud because they prominently display the payee’s account and routing number.
Reconciliation with invoices is also easier with electronic payments. Instead of filtering through papers and systems, invoices can be reconciled on your desktop or phone.
Electronic payments are not only a good option for your business but they offer customer perks as well. For example, you could offer early pay discounts. This benefits your customer by saving them money and you’re benefitting from getting paid and getting paid early! If you’re willing to accept card payments, you’re giving your customer the option to extend their payment terms, which may help them during the pandemic.
FNBO Has Solutions
Tools like PayMaker by FNBO make it easy to send and receive payments electronically. When using PayMaker, customers can easily pay within the invoice. All your customer needs to do is click the link in the invoice, add their payment information and then the payment is sent to your account and automatically reconciled with the invoice. Businesses can sign up for a free trial online and start using the service within 5 minutes. Even if you haven’t implemented an electronic receivables solution prior to the pandemic, you can still take advantage of the benefits.
Additionally, there are tools available that make it easy for your business to accept credit and debit card payments. There are also large billing networks you can join if you have a large volume of payments that allow you to get paid faster and access valuable payment data.
Above all, it’s key to maintain open communication and collaboration with your customers. They’re likely experiencing similar struggles and now is the time to work together.
Learn how FNBO is supporting its business customers during this critical time.
The articles in this blog are for informational purposes only and not intended to provide specific advice or recommendations. When making decisions about your financial situation, consult a financial professional for advice. Articles are not regularly updated, and information may become outdated.