3 Web apps that will make cash flow problems a thing of the past.

For the first five years in business I found cash flow to be the biggest drain on productivity and positivity. The endless struggle to get customers to pay for services they so readily demanded in urgent fashion. A mixture of late payers, won’t payers and me with my head in the sand, left me wondering why I had left employment. It most certainly held back our progress.

I decided to do something about it and set about looking at ways to automate the process so I could concentrate on growing the business. What I put in place worked perfectly and since then we rarely need to consider cash flow; except (of course) for big losses where companies go into liquidation. Sadly I still haven’t worked out how to avoid that one.

I personally take all this for granted now within our business, but I often see posts from people asking for debt collection services or outing someone on LinkedIn or Facebook for not paying for months at a time.  I see businesses still using Microsoft Excel and in some cases paper to track this debt, so I thought it might be worth posting to help people not ‘in the know’ with a side of business that I once found most difficult.

Direct Debit www.gocardless.com

Direct debit is one of those financial products that customers hate but suppliers love, and in my opinion it is massively misunderstood.

Experience has taught us that from a client’s perspective, the barriers to acceptance are mainly based around trust and the fact they thought we (the company) could withdraw large amounts from their (customers’) accounts without their knowledge, running off in to the sunset. In truth, the customer actually has more protection via the direct debit system than with all other fiat transactions. The direct debit guarantee states that any instruction to withdraw funds must give the payer 10 day’s notice. If the amount is incorrect, the payer is entitled to a full and immediate refund. There is also a monthly funds limit, but this can be lifted with both parties consent.

Another hurdle that I found less common is that some people want to be in control of when they pay you. At first I found this acceptable and understood the customer’s point of view, but as time passed I realised that the ones making this excuse were the bad payers; the ones that use your fees to balance their books without a second thought. It is a tough decision but I feel life is too short for this type of client. Well that is my take on it anyway, yours may differ.

From a supplier’s point of view, this seems like a headache to setup and administer, and in the past it was an expensive exercise to deploy and maintain with fees charged for every part of the process, including the getting an account.

All that has changed now and with companies like Gocardless, there are zero setup costs, 1% charges up to £200 and a flat £2.00 fee on anything above. The benefits do not stop there! The setup is so easy that even my parents could manage it (I am probably being a little unfair to my parents TBH, they once called me on Google Hangouts when I was in Rome and blew my mind). One feature which may seem trivial at first glance, is that you get notified if someone cancels their direct debit, which lets you know you have a problem immediately. Administration is easy too from Gocardless’s portal. You can create new charges for one off payments within about four clicks, or you can add the customer to a payment plan for the same amount of effort.

Knowing your fees are en route after you have done the hard work is a very nice feeling and it is how business should be. Notifications let you know any issues that may arise, be that lack of funds or direct debit cancellation, giving you notice within a 30 day charge period instead of compounding an existing issue you may be too busy to address, or are at best, ignoring. The benefits do not end there…..

Online accounts www.xero.com

We used to use Sage on premise prior to moving to Xero and just thinking back to those days fills me with dread. As a relatively new company, I was doing everything myself, and this was the part I dreaded. Chasing remittance, reconciling the accounts, doing the VAT return. On top of this I needed to chase clients for payment and do it in a tone that reflected the great customer service we were so passionate about.

Online systems can automate a lot of these processes, with bank feeds and a tiny bit of AI, guessing the transaction code making reconciliation a breeze, learning from its mistakes as you correct them. No more printing off customer statements or exporting them to Excel. Sending automated statements that have a polite reminder feel works far better than an emotional draft when your back is against the wall with cash flow. Digital supplier invoices can be emailed directly to the system and converted to transactions with the original invoice attached. Even expenses can be scanned directly from your mobile device.

The true beauty of these systems is the third party integrations though. Gocardless have Directli for Xero, a plugin that is easy to setup  and you can request the direct debit amount on the due date directly from Xero or your online accounts package. You raise an invoice, send it to the client and that is it. You get paid and Xero automatically reconciles the transaction. Like all great things, this simplicity makes it easy for you to take it for granted. Just writing this takes my mind back to the stress and negativity that that whole process used to bring in to my daily life. I literally used to lose sleep over most of the process back then, I don’t think that enough has been made of this marvel of modern technology.

I have not touched on the API’s that both services offer that allow deeper integration with existing systems and services, I wanted to keep this simple and will endeavour to write another post covering this topic, depending on the response.

(You do not have to use Xero or Gocardless, I am sure there are other services out there that work just as well, this is just what we use and it works for us. It does more than just work. It has a life changing impact, accounts stopped being an all nighter full of stress, and it really allowed me the freedom of thought to be creative in other areas of the business. Negative thought for me is always the only enemy and if you can irradiate a huge portion of it from your daily life, you have to go with it.)

Money Claim moneyclaim.gov.uk

Now don’t get me wrong, getting everyone to sign up to direct debit would have been a miracle. For those that didn’t we insisted on a standing order in the early days. Even with these two robust ways to collect revenue on a ongoing basis, companies fell through the cracks. We would start a new contract, usually with smaller companies and they wouldn’t sign up to the Gocardless straight away and before we had a system for following up they would just slip under the radar.

It shames me to say now but one went an entire year without paying but was happy enough to use our services. For me this is just the same as theft or writing a cheque that you know will bounce (the latter is illegal too). Some may say it was my fault, I suppose I do have high expectations of the human race.

Finding the governments website Moneyclaim.gov.uk was a revelation. It is definitely a service for those who just will not pay and is probably something you would use when the client relationship has broken down.

To use the service:

  • Sign up
  • Add the client details
  • Select the level of debt you are chasing
  • Pay the fees (this is a sliding scale, last time I used it, up to £500 was £35.00)
  • Upload your invoice copies
  • Add a brief description of the events
  • Submit

And that is as much as I have ever had to do. Moneyclaim was setup as service to ease the burden on Small Claims Court. The thief (we are not calling them a client any longer at this point) will receive a letter advising that a claim has been made and to respond with evidence to the contrary that the money isn’t outstanding or pay the bill in 30 days. If neither is done, the internet court (as I like to call it) awards in your favour and a judgement is made against the client (thief).

I have never had a client dispute the fact they owed money at this point, and they would have been lying if they did so. I am not sure what happens if they do, or if they make a counter claim, I can only assume the case advances to Small Claims Court (comments if anyone does know would be appreciated and helpful). Don’t be put off by this if you have provided goods or services and you are genuinely owed for services rendered.

And that is it. It may be obvious to many but I know there are a lot of people out there still struggling and many will say their business is different because everyone truly believes their business is unique in someway. I have given a lot of thought to many hypothetical situations and I cannot think of one instance where you could not set Direct Debit as your payment terms and put your cash flow on autopilot.