You’ve delivered that big new client project. Yet before you can call it truly done, you need to get paid. And the client that had been operating with great urgency is now saying the invoice needs to works its way through Accounting. The approver is on vacation but she’ll be back next week. So the check will be in the mail. It’s likely all good… you just need to wait.
Painful. And common according to new national research highlighting the challenges many entrepreneurs know well when it comes to managing cash and getting paid on their work. The WePay SMB & Money Survey shows 41% of U.S. small businesses report having experienced cash flow challenges and 16% have experienced payment fraud – just in the last year.
What’s more, many entrepreneurs say they’ve dealt with multiple instances of customer payment fraud, 8% of those affected reporting 10 or more instances, and more than half saying their first brush with payment fraud came within two years of starting their business.
More survey findings of note:
25% have experienced a chargeback (a fraudulent or disputed transaction that resulted in a financial institution requiring the business to make good on the loss) in the last year
33% usually get paid immediately (often for goods sold in-person), while the majority are left playing a delicate waiting and reminding game to get paid
10% have had to chase down a customer payment for 181 days or longer
What’s an entrepreneur to do when they’re passionate about what they do and yet they don’t want to let payments challenges dull that passion or take a huge amount of time ongoing. Here are five lessons we’ve learned helping millions of merchants process payments on more than 1,000 online platforms:
Align up front on expectations. When you take on a new client or project, it pays (pun intended) to invest the time getting clear on details of the deliverable, deliverable timing, and payment timing. Going one step further, capture it in an estimate or invoice. The extra effort will go a long way in ensuring there’s no disputed charge later, nor any surprise like you expecting to be paid immediately upon service delivery while your client is planning to pay net 60.
Dispute disputed charges. We’ve come to see many entrepreneurs take the hit and move on. And we appreciate this may be the path of least resistance on smaller transactions. Yet you can fight and win a chargeback claim. Step one should be to engage your customer directly to clear up any confusion. It may help to remind them of your return policy, restocking fees, and/or terms of service. You can also dispute through the bank, presenting documentation including signed contracts or receipts, relevant emails, and screenshots of shipment tracking.
Open up to additional payment methods. Many entrepreneurs refuse to accept credit cards or even ACH given their fees. None of us likes added cost. Yet holistically, we’ve come to find allowing customers to pay with their preferred payment method increases customer conversion. And if you can help them to pay you immediately, better still. Also, if you assign value to not chasing down and waiting on payments, added fees can very well be ROI positive.
Use a platform with integrated payments. WePay’s survey found those SMBs that process all of their customer payments inside their go-to management software platform or app – like a Shopify, Zoho or BuilderTREND – report a 15% lower incidence of cash flow management issues. This finding fits with our broader experience that software with integrated payments can make it much easier for clients to pay you immediately… and it’s inside something you’re already using. Some of the best platform offer extensive risk and fraud protections. They can additionally give you access to new customer-friendly payment options like Apple Pay or Android Pay.
Be skeptical when it’s too good to be true. As entrepreneurs do more business online, they’re increasingly falling victim to fraud that only becomes apparent at the time of payment. Don’t be scared – be prepared: Seek more information and assurance if you see warning signs like a high value rush order from a new client, a person overseas wanting to work with your local business from afar, or someone suggesting you pay their subcontractor from a lump sum they will pay you.
Tina Hsiao is Vice President of Risk & Chargeback Operations at WePay, a company that helps online platforms provide integrated payments processing without friction or fraud. She is also a Harvard Business School MBA who spent more than 10 years in Intuit’s small business division.