After aggregating some 16 million invoices in our database, we’ve found out that worldwide on average Xero users are getting paid more than two weeks faster than they were in late 2011.
In October 2011, Xero users were getting paid after an average of 48 days. Now they’re getting paid in an average of 33 days – a 15 day difference.
This is great because ready access to cash is such a key part of every small business’s success or failure. If you have cash, you pay your bills and the lights stay on. If you don’t have cash, you can’t pay your bills and the lights go out. No matter how many outstanding invoices you have out in the field, it’s the cash in the bank that actually fuels your business.
How do we get paid even faster?
We’re not satisfied with 33 days — and you shouldn’t be either. The lower we can get this number, the healthier your business will be. So here are a few ways you can use Xero to get paid faster and turn more invoices into cold, hard cash.
Invoice immediately
Use Xero’s mobile accounting app to invoice immediately after a job is complete. This lets you enjoy the freedom to send or approve invoices without being tethered to your workstation, or you can get them do whenever you have a few moments to spare.
Use online invoicing
Online invoicing can help you get paid faster by cutting time out of the actual invoicing process. It’s easy to forget to pay an invoice, especially when it arrives days later with payment instructions buried in fine print. With online invoicing in Xero, the invoice is sent electronically direct to the customer, who can pay instantly through a “pay now” button right on the invoice.
Use the aged receivables report to chase late invoices.
Online invoicing makes the process faster. But some customers are just tardy payers, whether their invoice is online, offline or chiseled in stone. Pull up the aged receivables report and you can see who has the biggest outstanding invoice, and who has the oldest outstanding invoice. This way you can make a few targeted phone calls which should have a much higher impact on your cashflow.
Invite an advisor to clear up bottlenecks
Accountants are a great resource that small businesses don’t tap into often enough. Your accountant (or other advisor) can spot all kinds of problems that you may not notice. Or, even better, he or she can spot small problems that you can quickly solve before they develop into major cashflow bottlenecks in the future. It might cost a little bit, but it is more often than not a worthwhile investment.
Those are just a few things we thought of. How are you using Xero to get paid faster? Let us know in the comments.
Is that 33 days from an invoice’s “invoice” date, or “due” date? Can you do a similar infographic showing the time between invoice date and due date and then compare it to the paid date comparison you have above? Because without this it could just mean that you have had an influx of business with smaller payment terms, or that initially you had lots of business with long payment terms, and not that anyone is actually being paid “faster”.
The data falls in line with what we are seeing as a business but also what most of our clients are seeing
Naturally there is some clients / industries that are seeing longer payment days but the vast majority are seeing a reduction in how long it takes to get paid
Online invoicing is certainly the way ahead not only does it cut down on postage cost and delays but it means in some cases we get paid straight away as the client pays as soon as the work is completed
Having xero implemented correctly and using it daily certainly helps this process speed up and xero is such a easy tool to use that doing your accounts becomes fun and quick rather then a real bore as I felt it was with some other packages
Looking forward to where the introduction of more payment gateways take the stats over the next three years with products such as eway and paypal as well as others
Finally debtor tools such as debtor daddy and SMS my debtors certainly help to clear up those clients that done pay within the standard terms
Thanks for the comments, Bill. The data is based on the period of time from invoice date to payment date, so it is days to get paid..
Xero looked at the same businesses over the whole period to eliminate any skew from adding in new businesses that may have different payment terms.
Like @Stephen I agree I’m getting paid faster.
@MinuteDock helps me track time and provide very detailed invoices – I even had a client come back to me last week and ask for all the details to be removed – as she did not want her partner realising how much assistance she needed!
@DebtorDaddy helps with automated follow up of invoices.
@PayPal integration helps with those clients who prefer to pay with credit card.
I’m then left with a very small amount of invoice chasing for the more complicated situations – massive reduction in admin time – massive improvement to cashflow.
Nice!
I’ve also seen a trend with organisations decreasing their payment terms from 30 days down to 14 days and even 7 days. It’s a simple change that can have an immediate impact on cash flow.
Also receiving an invoice closer to the time the work was completed, coupled with a shorter due date can inspire a satisfied customer to flick you the funds straight away… and the Xero ‘pay now’ button and PayPal integration makes this more likely. Case in point, in my web company we’re sometimes getting paid within minutes of invoices going out thanks to these features that make it easy for customers to pay now.
For us it’s about having a system that flows seamlessly (and automatically) from quote to job to invoice to payment and chasing – so all the bases are covered and less time is wasted on getting paid and more time is spent on doing great things.
With Xero I think every business owner has the opportunity to tune their business to make cash flow faster. And there’s plenty of levers you can pull to see what makes the biggest impact.
It certainly has made a difference to our business and our clients. By using Xero and Debtor daddy we have seen lower admin time and costs involved in managing our debtors and (in our case) a drop in debtors of just under 20% over 4 weeks when we implemented Debtor Daddy!
As outlined above the use of cloud and instant payment options has also had a big impact on automating processes and getting paid faster. In my view its a matter of using the eco-system to customise a business platform for your particular circumstances, including maximising your cashflow.
Agreed, online invoicing and the Xero format are key in improving both invoicing and credit control for clients, particularly the smaller, less business minded individuals – our only issue is the volume of Xero emails/invoices ending up in spam mail boxes