Last editedNov 20223 min read
You can have the best products on the market, but without an efficient business strategy to back it up, your company might still struggle. This is particularly important for small businesses that don’t have any capital to waste. One of the primary elements of a business growth plan is a good payment strategy. Here’s what to include and why it’s so important.
What is a payment strategy?
A payment business strategy involves all aspects of the payment process. This includes asking the following questions:
How and when do you make payments to cover business expenses?
How do you pay business expenses?
How do you manage the money flowing into your business?
How many payment options do you offer to clients?
How do you track and manage late payments?
What is the cost of late payments and how does this impact your cash flow over time?
These should all be answered in a comprehensive payment strategy and underline the importance of a strong payment system. But all strategies should also be tailored to the needs of each individual business.
For example, some businesses may receive discounts from paying bills early, while others need to think about how they moderate cash flow and time payments for operating expenses accordingly.
What is a payment method example?
In recent years, payment methods have evolved substantially, with cash and paper cheques giving way to online and mobile payments, direct debits and digital transfers. For most businesses, the best payment strategy is to accept as many payment methods as possible, with the following taking precedence:
Credit and debit card
This allows consumers to quickly pay for goods and services, either from a line of credit or their own bank accounts.
A digital wallet contains various payment types in one digital location and uses customer verification such as passcodes and (where supported) biometrics to permit access.
Direct debit or bank transfer
This method allows consumers to pay directly from their bank accounts. When dealing with online bank transfers, payment gateways are used to allow for a reliable transfer of funds. GoCardless, for example, uses a pull-based system to take money directly and securely from customer bank accounts via direct debit.
Buy now, pay later
This is a method that lets customers break down their purchases into a series of monthly payments, with the merchant receiving the total payment upfront.
Prepaid card and voucher
This loads value onto a scannable voucher with a transaction reference number that can be used online.
This involves customers paying for goods and services with a blockchain-based digital currency such as Bitcoin.
Why is a payment strategy so important?
Without a strategy in place to manage incoming and outgoing payments, your cash flow and liquidity might suffer. A good strategy maximises the potential of every invoice, both in terms of payment terms and timings. It reduces the cost of human error with enhanced payment tracking, flagging discrepancies between invoices and payments.
As payment methods change over time, it’s also important to keep on top of the latest automated methods for managing accounts payable. Rethinking your payment strategy allows you to offer more options to your customers, potentially boosting sales and revenue in the process.
Elements of a good payment strategy
Now that we’ve covered why a payment strategy is so important, what should you consider when creating one of your own?
1. Efficient business payment methods
If you don’t offer the latest business payment methods to customers, your business could fall behind the competition. This is particularly important for online stores which could lose sales at the checkout stage if you don’t have electronic payments enabled.
2. Greater efficiency with automation
Automated payment solutions should be a part of any strategy, cutting down on time spent with financial paperwork. Automated systems track and time payments, issue invoices and chase up on late payments. All of this comes at reduced cost, with faster processing times. Repetitive tasks can be eliminated, freeing up employees for higher-value tasks.
3. Greater security with digital tools
Along with greater efficiency, security should also be a central element of any payment strategy. Make sure to put systems in place to protect payment details, including card processing and bank transfers. An automated system ensures PCI compliance and data protection.
Positioning payments in your business growth plan
A payment strategy can and should be used as part of your wider small business growth plan. For businesses operating on tight margins, there’s little room for error. Streamlining your payment processes with a comprehensive system ensures that you’re not only cutting down on costs and human error but encouraging growth. Track operating expenses carefully so that you’re able to make data-driven decisions.
At the same time, enabling a wider range of business payment methods means that you can work with a wider selection of partners. It also facilitates cross-border transactions for expansion into international markets. This is all good news for growth-minded start-ups.
We can help
GoCardless helps you automate payment collection, cutting down on the amount of admin your team needs to deal with when chasing invoices. Find out how GoCardless can help you with ad hoc payments or recurring payments.