Article written by TradeSafe
Would you worry about cash flow if all the money you are owed was paid to you? This is a real concern faced by every small business owner. It is hard to name a more unpleasant part of running a business. There are several proposed remedies that small business owners can use to collect outstanding invoices ranging from specially worded letters to personal phone calls and even professional collection departments. Collecting outstanding money is time consuming and costs rise substantially when the legal route is the only option left.
A quick scan of the internet shows remedies to collect outstanding cash include tips like:
- Research potential clients beforehand.
- Collect at least 50% of your project fee up front. (However, on the flipside, the client may be fearful that their 50% deposit will be squandered.)
- Consider only working with established companies who have a good reputation.
- Follow up politely.
- Send a “past due” reminder.
- Follow up Again.
- If still unpaid move on. Or employ a collection agency.
Some small businesses have dedicated collection departments to assist with collections. This all adds to the cost of doing business. And even the best trained staff are not always able to collect all the money you are owed.
Technology as a solution to reduce unpaid invoices
Recognising this as a significant risk to small business, online escrow payment solutions have evolved. Funds get deposited into an escrow holding account, dedicated solely to that transaction and payment is made immediately once both parties have done what they undertook to do. It is all online and provides for milestone payments with an audited trail available.
The cost of escrow is minimal, starting at 1.0% of the cost of the deal and gets less as the cost of the transaction rises. The fee can even be split between the parties. Imagine never having to chase after unpaid invoices ever again.
As we enter the fourth industrial revolution where technology is playing an even greater role in business transactions, it is appropriate for small business to know that effective solutions are available to minimise transactional fraud and ensure the payment of invoices. Digital platforms and APIs (Application Programme Interface) are examples of technology that can prevent unpaid invoices and is becoming popular among both small and large businesses.
Small businesses can plug an escrow API solution into its day-to-day operations to ensure that invoices are paid. This can be integrated directly into your website, marketplace, or trading system, and is a guaranteed way of preventing fraud and ensuring immediate payment when your organisation delivers what was promised.