On May 21, Xero, the global leader in online accounting software, announced new data revealing that U.S. small businesses (SMBs) using Xero accounting software and invoicing tools are getting paid faster year-over-year and faster than average U.S. businesses.
Businesses in the U.S. wait on average 41 days to be paid according to the Atradius’ Payment Practices Barometer for September 2013. This is 12 days longer than businesses using Xero’s online accounting and invoicing tools.
Moreover, SMBs using Xero are getting paid faster year-over-year from the time they create and send an invoice to the time they receive payment. Findings include:
- October 2011: It took an average of 46 days for SMBs to get paid.
- October 2012: This average decreased to 40 days.
- October 2013: This average further decreased to 29 days – 17 days faster than 2011.
This data is based on aggregated, anonymous data from 300,000 invoices. It was generated by the same 1,400+ U.S. small businesses that have been using Xero’s accounting and billing features since October 2011.
“Before using Xero, it wasn’t uncommon for us to get paid four to six months late,” said Loryn Lyle, managing partner of SILVR Social in Solana Beach, Calif. “Now that we’re able to bill our clients using Xero’s online invoicing tool, we never go longer than nine business days without receiving payment. Our improved cash flow has allowed us to move into a new office space and hire two new full time employees."
Worldwide, Xero data from 43,000 small businesses in the U.S., UK, Australia and New Zealand, shows that on average small businesses are getting paid 15 days faster during this same two-year time period, reducing the amount of time from an average of 48 to 33 days. Overall, small businesses on the Xero platform have processed nearly twice as many invoices totaling nearly $1 billion more in value compared to two years ago.
“Xero’s platform holds a wealth of data that shows the unique trends and behavior of SMBs worldwide,” said Peter Karpas, Xero CEO of North America. “These stats on how long it takes SMBs to get paid is crucial as cash flow is the number one reason small businesses stop growing. While the improving economy helps, our data shows a strong correlation between using Xero’s online accounting and invoicing tools and getting paid faster. And when businesses get paid on time, they grow and thrive because they can spend money on marketing, hiring people, and buying inventory.”
Online Accounting and Invoicing
Xero’s online accounting platform for small business streamlines what were once tedious, time-consuming tasks such as invoicing. Today, business owners can instantly send invoices via their computer or mobile devices, making it easy for customers to pay. They can manage their accounts receivables more effectively by seeing who has viewed invoices and send reminders for past due accounts. At the same time, they can chase late payments more efficiently by using the technology to identify which customers to follow up with immediately and which ones to wait on.
Tips on Getting Paid
Along with using Xero, below are additional tips on getting paid on time, invoicing efficiently and managing cash flow:
Tip #1: Discuss payment terms before you get started: Getting this clear upfront means that there is no confusion down the road. It also sets the client’s expectations around payment before you start the work.
Tip #2: Invoice as soon as possible: Send your invoice as soon as possible, the sooner a client receives an invoice the sooner they will make payment. It also means they will receive it when the value of your work is still fresh in their mind.
Tip #3: Set shorter payment terms: If you need to receive payment within 30 days, our data reveals that you will need to set your payment term 13 days or less. Keep in mind that on average, debtors pay invoices two weeks after the due date.
Tip #4: Make the invoice clear and easy to understand: List the details of the job in a way that makes sense to the client and receive validation that they read clearly; any confusion could create a payment lag. It’s also good to personalize your invoice with your business logo – it helps carry on the professionalism of your work. And most importantly, make sure your payment details are on the invoice so you can be paid.
Tip #5: Keep on track with debtors: The squeaky wheel gets the grease. When things become overdue, send reminders, monthly statements or make phone calls. A variety of debtor tracking tools that work with Xero can also help with this. By staying on top of debtors, it will help remind your clients that you are serious about getting the invoice paid.
For more tips like this, check out Xero’s Small Business Guides: Invoice payment terms: top seven tips
Check out Xero’s infographic here.
Xero is beautiful, easy to use online accounting software for small businesses and their advisors. The company has over 280,000 paying customers in more than 100 countries around the world. Xero seamlessly integrates with over 300 best-in-class business tools such as as Square for processing payments on mobile devices, ADP for managing payroll and Google Apps for integrating Google docs. Recently Xero garnered a “Top Choice” review for online-based business accounting apps from MacWorld. The Xero US team is headquartered in San Francisco. Xero is hosted with Rackspace in Chicago.