In a perfect world, flawless transactions would be the norm. Customers would pay on time through fast, frictionless payment methods, triggering automated accounting workflows. Yet, achieving this feat is challenging in real life.
Optimizing your payment processing can maximize your cash flow and deliver big wins for your business. Explore ways to eliminate inefficiencies and improve customer experiences.
What is a streamlined payment process?
An effective payment process manages transactions between clients and businesses with minimal friction and errors. On the customer side, regardless of where they pay, their experience should be fast and secure.
Likewise, companies reduce their operating costs by streamlining payment processing. Automated workflows keep corporate accounts balanced while scheduled reports inform leaders.
[Read more: What Is AI-Powered Business Automation?]
1. Examine payment processes for friction
Inconvenient and poor experiences result in lost sales and late payments. Payment processing may take too long, or your website may take clients to a new payment page, which may cause them to question if it's secure. Some sites aren't mobile-responsive, and others require them to jump through hoops to create an account.
Test customer experiences on various devices and consider the following aspects:
- What is the sign-in process like on mobile and desktop devices?
- Is it possible to pay as a guest without creating an account?
- Can different-sized fingers tap on-screen payment buttons without making mistakes?
- Does the payment process occur on a single screen or browser?
- Have you tested payment links, QR codes, and invoice features?
- Does your branding show on all payment pages?
- What are page load times and processing speeds?
- Does your payment software provide error pages and receipts?
- How can a customer contact you if they have questions during checkout?
2. Embrace electronic invoicing
Electronic invoicing is a business must-have. Low-cost and free accounting tools offer invoicing, payment reminders, and client databases. You can invoice clients using the software or download the statement as a PDF.
When you use an invoicing platform with integrated payment processing, your customers can click to pay directly from their inbox. Well-known solutions include QuickBooks Online, Zoho Books, and FreshBooks.
3. Leverage recurring billing features
Automation is critical to streamlining payment processing. Using employee labor to create invoices for clients with regular billing cycles doesn't make sense from an operational standpoint. Accounting and invoicing software does this for you. In addition, payment processors like Helcim offer free tools for managing recurring payments.
With these payment processing systems in place, recurring invoices automatically go to clients on the selected date. For customers who require paper statements, you can schedule a report so your staff can print all recurring invoices simultaneously.
Electronic invoicing is a business must-have. Low-cost and free accounting tools offer invoicing, payment reminders, and client databases.
4. Automate bank reconciliation
Accounts receivable (AR) automation eliminates multiple manual steps, including matching withdrawals to expenses on spreadsheets and verifying bank deposits. Computer processing tools handle these tasks more efficiently and with fewer errors than humans.
Xero, QuickBooks Online, and Sage 50 Accounting streamline repetitive processes. Companies with high-volume transactions or complex reconciliations may prefer a system like NetSuite. It offers a module with intelligent automatch, custom matching rules, and unlimited data sources.
5. Consider payment portals or customer account features
Secure client areas improve experiences for business-to-business (B2B) and business-to-consumer (B2C). These spaces centralize buyer purchase information and make it easier to contact your company.
B2B clients use payment portals to download statements, view terms, and review options if they can't pay. Many platforms support two-way communication and enable payment processing, which is crucial to enhancing B2B collections.
E-commerce platforms offer customer account features. Shoppers create passwords, view order histories, and save payment information and delivery addresses. For example, Wix provides a member's area. It includes My Wallet and My Orders sections, but retailers can also add a wishlist, social profile page, or exclusive member content.
6. Track accounts receivable performance metrics
Optimize payment processing through financial reports from your accounting software. This data keeps your team accountable and on top of any potential problems. For instance, consider workflow automation or adjusting staffing levels if your revised invoices metric increases several months in a row.
Here are four key performance indicators and metrics to watch:
- Days sales outstanding (DSO): The average number of days it takes to get paid, whether that's an online store or invoices to settle and transfer to your account.
- AR turnover ratio: How often your company collects its average AR balance during a specific time frame. This measure is determined by dividing the net credit sales by the average accounts receivable.
- Average days delinquent (ADD): This measures the typical days from the due date and when the client pays.
- Revised invoices: The frequency of statement modifications during a time frame.
[Read more: Choosing the Right Accounting Software for Your Business]
7. Encourage early payments
Getting paid quickly usually benefits small businesses. In addition to fast, convenient payment options, companies can shorten payment terms or offer early payment discounts. Both have advantages and challenges, with some limitations due to the industry the business is in.
For instance, rental companies can simplify payment processing and increase revenue using a 28-day billing cycle over a net 30. B2B firms may negotiate terms with clients and insert a clause for a slight percentage reduction when invoices are paid early.
8. Increase transparency and improve communication
Be worthy of your customer's trust — that's a best practice for payment processing. Any information related to your customer’s money and purchase should be written in short paragraphs at the fifth-grade level using easy-to-understand words.
Consider these suggestions:
- Define any terms that a layperson or non-English speaker may not know.
- Add internal links to your help center or frequently asked questions pages.
- Spell out precisely how your customers can cancel orders and request refunds.
- Give estimated time frames for shipping, returns, and responses.
- Provide contact details and links on every page.
- Use feedback forms or surveys to evaluate payment processing technology.
9. Accept more payment methods
Taking a one-size-fits-all approach to the payment processing experience can backfire. Recognize that not everyone has cash or wants to pay electronically, and a customer's preferred method may vary by product. Indeed, research shows that psychology plays a role in payment decisions.
Still, a wider net accounts for generational, product, or device differences. Android fans may rely on Google Pay, whereas iPhone users prefer to click to pay rather than enter their credit card details. Fortunately, credit card processors, point-of-sales systems, and e-commerce platforms that support mobile payments accept Apple, Samsung, and Google Pay.
[Read more: How to Collect Payments: A Guide to Every Form of Payment]
10. Weigh the pros and cons of extending payment terms
In some instances, your firm may benefit from extending customer credit. This approach requires considerable thought based on your finances, the individual client, and the level of risk you’re willing to accept.
Alternatively, payment processing platforms and e-commerce solutions offer buy now, pay later options. These merchant services go through Affirm, Afterpay, or Klarna. You can also access them through Shopify, Stripe, and PayPal. The provider assumes the credit risk but charges a higher transaction fee, typically 6% or more.
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