Get Money Sooner
by Mike Procopio, Blue Cow Software
Streamline cash flow by optimizing payments
An old business axiom holds that “nothing happens until something gets sold.” I think that should be amended with “… and paid.” Delivering a million gallons of propane is all well and good, but until the money is in the bank, your company remains cash poor and probably in debt. It is good business practice to do everything you can to improve cash flow by getting paid faster. Time is money!
Start by making it easier for customers to pay you. That means meeting them halfway by offering payment options that make sense in today’s digital world. Customers are pressed for time and want to simplify their own cash management by paying electronically. That means credit cards, debit cards, or automated payments from their banks. Making these options available is not only good customer service, but also speeds the flow of cash into your accounts.
Be ready to accommodate customers by accepting multiple payment options through a payment “gateway” that is formatted for companies in the fuel industry. Delivery and service operations have specific prerequisites that may not be readily available through a general business processing platform.
Here’s an example of improving cash flow by expanding your payment options. Many fuel dealers still insist that customers write a check to pay their invoice. That means sitting for days while the post office delivers the payment, then making a bank deposit, then waiting several more days for the deposit to clear and the money to become available. That’s an unnecessary delay and a hassle for the customer and the dealer’s accounting staff.
Why wait? Today customers can instantly transfer money from their checking account to your bank via ACH (automated clearinghouse) or e-check. It is simpler for them and faster for you. Offering payment via ACH or e-check has additional benefits in terms of reduced processing fees. For instance, a $10,000 air conditioning installation paid for with an American Express card might cost you $300 or more in card fees, but an ACH transfer costs only about 60 cents in fees and you’ll have your money the next day.
For a variety of reasons, some customers will choose to pay with a credit card for fuel delivery, service or equipment. Customers enjoy having several days or weeks before payment to the credit card issuer is due, the convenience of paying a single invoice for multiple purchases, and the benefit of accumulating points in a loyalty program. While you will pay processing fees, credit card payments still benefit your cash flow as funds are typically available the next day.
Savings in time and money also apply if you have delivery customers set up on an auto-bill program, which virtually eliminates processing time for your staff. This is especially appealing to customers on budget plans who know exactly how much will be transferred from their bank account each month.
Protecting Your Backside
Don’t go blindly into the world of electronic payments, especially since THIS vendor will be handling your money. There will be processing fees and rates involved with credit cards or ACH transfers, and they can vary widely as can the service you receive from the providers. Here are some tips to protect your funds.
Choose a payment software program that integrates seamlessly with your accounting and enterprise management platform or look for an all-encompassing platform that has electronic payment processing already incorporated. No need to create another level of accounting work if you can have all systems talking to one another.
You also have a dizzying array of options when it comes to how your payments are processed, with many companies vying for your business. Like any other vendor selection, you should do your due diligence when it comes to features and benefits. There should be full transparency in everything from rates and fees to processing time and service agreements.
Learn about interchange fees and how they will be applied to your company. Be sure you are getting energy/utility rates from the processor, as they can result in substantial savings on fees. If your processing volume is high enough, you might consider flat-rate pricing to take the guesswork out of your monthly card fees. Always review your monthly statements for hidden fees or charges, or changes in rates that the processor may have failed to convey to you.
Make sure you review the methods of payments you offer customers, as fees vary among credit card brands and banks. With inflation continuing to remain high, you may want to temporarily shut off payment channels whose rates have crept to unacceptably high levels. Insist on “next day” funding of credit card payments without additional fees – a critical step to improving your cash flow. Find a gateway provider who offers pre-authorization, which allows you to take on-call customers on a pre-pay basis, ensuring funds are in your account before you make a delivery. Finally, don’t get weighed down by tying yourself to a vendor who still uses standalone terminals for processing – payments and refunds should all be done through a virtual online terminal for security and convenience.
Getting to the point where you can accept electronic payments via credit card or bank transfer can take some time and effort. And once you get there, you need to carefully monitor the process to help ensure you are receiving the best rates and service. But the upside is well worth the effort and the fees. Streamlining payments from your customers can help improve cash flow at a critical time. Then you can tackle automating payments to vendors … but that is a topic for another article.
Mike Procopio is Inside Sales Manager at Blue Cow Software, an enterprise software platform developer working exclusively in the delivered fuels industry. He can be reached at firstname.lastname@example.org.