What is PSD2 and what do I need to know?

The internet is the world’s biggest store and you don’t even have to leave home to set foot in it. You can find pretty much have everything you need and better still you can have it all delivered to your door at the push of a button or two.

However, the problem is that online shopping has become too easy, and as a result, has become fertile ground for fraudsters.

Punching your payment details into a merchants website may be something you do without giving it a second thought, but unfortunately, and with a sense of inevitability, the rise in online purchasing has also resulted in a significant rise in online fraud too.

In an attempt to combat the rising wave of fraudulent activity, the European Commission introduced a range of laws and legislation known as the Payment Service Directive (PSD). The first wave of PSD legislation was rolled out between 2001 and 2007. Now the second part (known as PSD2 which was agreed by the European Union back in 2015) will come into effect on the 14th September 2019.

All PSD legislation covers payments which take place in the European Economic Area, so isn’t necessarily confined to EU member states and requires payment service providers and merchants to ensure stronger authentication for online transactions.

These include purchases, payment for services and credit transfers. PSD2 will require what’s known as strong customer authentication in order to build an extra layer of security for those performing online transactions.

There are three main forms of customer authentication which can be broken down as follows:

  • Something you know – This is a username, password or PIN
  • Something you have – A physical debit or credit card which has the card number, expiry date and CCV code on the back.
  • Something you are – This can be a fingerprint or face recognition.

PSD2 regulations will require two out of these three methods of authentication to be used for each online transaction.

This new legislation will therefore mean significant change for customers, payment service providers and merchants.

For a quick and easy guide to PSD2 check out this video:


For further reading about the implications PSD2 will have for businesses, have a look at this guide produced by Barclaycard:


Make them remember how you made them feel

Memorable quotes often aren’t so memorable because when we try to remember them, we often cobble some form of the original quote in our head and go with that. Then, and often without any prior intention to seek out such item, will casually saunter into a gift shop one day and find that selfsame quote in a nice little frame, ready and waiting to be purchased and stuck on the wall.

Indeed, there are a whole host of quotes out there, some motivational, many inspirational, and some that offer reflection and a reminder of just how lucky we are to be here despite life having a habit of throwing a few curveballs at you along the way.

There’s one such quote by American writer Maya Angelou which has been paraphrased in many ways over the years, but which goes along the line of “People will forget what you said, but they will never forget how you made them feel.”

Feelings are important and the experience received is often valued just as highly as the outcome itself. When we receive good service, we’re far more likely to return, and giving your customers a good experience has come to gather increasing importance.

However, providing your customers with a good experience doesn’t necessarily mean being at their every beck and call, as on many occasions a less hands-off approach can do the trick.

Allowing your customers to access information they would otherwise need to request from you is a simple but effective way of enhancing their experience. Customers like options, and providing an Online Payment & Copy Document System is hugely convenient as it provides customers with an alternative method in obtaining the information they require. Giving customers this alternative option and the freedom to obtain such information 24/7 can be a game changer.

Now it may seem strange that the less interaction you have with your customers the happier they will be, but offering customers this level of direct access, and the opportunity to obtain the necessary information on a self-serve basis offers convenience, and in most cases proves to be far more efficient for both parties.

With the rapid increase in self-service technology in all aspects of our lives, there is a growing expectation that the information required should be instantly available and research shows that around 70% of customers expect a website to have some form of self-serve option. Therefore, by offering self-serve options, you are meeting customer expectations and that’s a tick in the box for you when it comes to future interactions.

Most customer satisfaction surveys find that customer experience is fast becoming the number one priority when it comes to interactions. Digital marketing firm Econsultancy recently commissioned a study which found that customer experience was fast becoming the number one area of investment for service industry firms. It found that 86% of customers were willing to pay more for a better customer experience while 65% said that good experience with a company or brand was better than memorable advertising, and three-quarters of those surveyed said that customer experience was an important part of purchase decisions.

Generating those positive feelings is the key to happy customer relations and a happy customer is a frequent customer. Remember, it is how you make them feel which will make them come back to you.

“People will forget what you said, but they will never forget how you made them feel” by Maya Angelou is true to the above, but let us know in the comments below your favourite quote and by whom.

How reducing your DSO can deliver more profit to your business

When it comes to business cash is like blood, you need it to be pumping around your company’s arteries in order to remain healthy and allow it to grow. A high DSO (Daily Sales Outstanding) can certainly curtail that growth and whilst there are some fantastic training courses out there, and the internet is awash with collection strategies designed to improve cash flow, the simple fact remains that the quicker you collect payment for the goods or services provided, the healthier your business and it’s cash flow will be.

But whilst much thought is given to ways in which cash flow can be increased, quite often there is less thought or even no thought at all given to the true cost of having a high DSO and the negative impact this has on the profitability of the business. This blog will offer an insight, or to some, a reminder of the importance of maintaining a low DSO, and provide a few pointers on how to reduce your Daily Sales Outstanding.

Daily Sales Outstanding Explained

So what actually is Daily Sales Outstanding (DSO) and how is it calculated?

DSO is the average number of days that it takes for you to collect the cash following a sale made on credit. A low DSO number means that it takes a business fewer days to collect it’s accounts receivable. A high DSO number means that following the sale of goods or services it is taking longer for customers of that business to pay.

There are several methods of calculating DSO, a common formula used is as follows:

  • Accounts Receivable (DIVIDED BY)
  • Total Credit Sales (TIMES BY)
  • Number of days (TIME PERIOD EXAMINED)

For example, in the month of April the business made a total of £500,000 in “Credit Sales” and had an amount of £350,000 outstanding in “Accounts Receivable”. There are 30 days in April so the businesses DSO for that month could be calculated as:

350,000 ÷ 500,000 = 0.7 × 30 (days in April) = 21 days giving a DSO of 21.

A DSO below 45 would generally be considered as low, however there are factors such as the business type and company structure that would determine what is a high or low DSO.

How a high DSO can reduce your profits

It goes without saying that there are obvious disadvantages to being paid late, and the law of diminishing returns certainly applies in the case of overdue invoices.

Invoices that go beyond 120 days overdue are significantly less likely to be paid, subsequently leading to a loss in revenue, and in most cases actually costing your business money. Expenses relating to bank charges and overdraft fees are often overlooked, but in most cases these fees could be avoided if the business had more cash at their disposal. Furthermore, businesses with a high DSO and a lack of liquid assets may find themselves struggling to maintain their monthly operational costs, and as a result, may resort to outside financing leading to interest being charged, which again eats into the bottom line.

There are the operational costs associated with chasing and recovering overdue debts too. As debts age there is a propensity for invoices to be queried, and although a resolution could result in payment being made, collectively it could take several hours and require input from multiple members of staff across various departments in order to reach the desired outcome – which is time and resource that might not have been factored into the price quoted when making the sale.

If your business is not utilising our Online Payment System copy document requests can also sap resource and impact greatly on the businesses ability to collect payments as they fall due. Dealing with high volumes of copy document requests can often prevent controllers from contacting customers prior to the due date to ensure that the invoice has been received, there are no issues, and that the invoice is in the customers system ready for payment. Having the time and ability to undertake this “pre-due” activity will certainly contribute to a reduction in DSO, and with the use of our Online Payment System fewer queries will be received which will undoubtedly free up more time for your business to focus on cleaning up the back end of the ledger.

Fewer queries, coupled with greater levels of efficiency could mean your business has the opportunity to run leaner than before, leading to a reduction in operating costs and higher levels of profit.

Where it is necessary for debts to be referred to a 3rd party for collection, a commission may be charged to you. Solicitors costs and Court fees may also be incurred where litigation is required. And although some of the fees charged can be recovered, there is a chance that they will not be, thus resulting in additional costs to the business.

Incurring these additional recovery costs and having less cash readily available as a result of a high DSO can be a factor in your businesses ability to grow. Whether growth is achieved through acquisition or through the hiring of additional resource, having greater levels of cash at your disposal will allow the business to be more flexible, grow at a rate that reflects the ambitions of the business, and move more swiftly on opportunities that present themselves.

How to reduce your DSO

Reducing the businesses DSO and understanding the benefits of doing so is much like dieting, and like diets we tend to start off with a target figure in mind and then set about achieving that goal. In both scenario’s there will be processes adopted and whether it’s eating more healthily and exercising more, or automating parts of the collection and allocation process and enabling customers to self-serve for items such as copy invoices, once the target is achieved both will be stronger, healthier and more likely to achieve longevity.

Sure there will be bumps along the way, that takeaway that you know has a gazillion calories in it, but hey it’s the weekend, or that key client that despite best efforts and extended terms always seem to pay at 90 days rather than the 60 you’d agreed. But they pay, and the Sales Director doesn’t want their “biggest client” upsetting.

Nevertheless, reducing your DSO will significantly improve the profitability of your business and below are just a few pointers on the measures you could take to achieve your goal:

  • Automate processes and offer customers the opportunity to obtain copy documents on a self-serve basis
  • Credit check your customers before they open a trade account and periodically
  • Introduce Direct Debit
  • Don’t wait to invoice customers, instead invoice customers as soon as the product or service has been delivered.
  • Make sure that you include Purchase Order Numbers where applicable.
  • Set up an invoice template that includes all of the important information, including bank details, payment terms, due date and of course a clear description of the goods or services provided.
  • Use an accounting system that alerts and reminds you of the accounts which are overdue.
  • Offer customers the opportunity to pay their invoices outside of working hours (click here for more details)
  • Ask for deposits upfront and part payments during the course of the project rather than invoicing the full amount following completion.
  • Review your customers and reduce payment terms for those customers that repeatedly pay late.
  • Charge late payment fees in line with the Late Payment of Commercial Debts Act to deter customers from paying late in the future.

Tips to write effective invoices and get paid quicker

If most of your invoices are written in hope rather than expectation then you may be asking to be taken advantage of by customers who have a reputation for dragging their heels when it comes to making payment.

For most SME’s late payment of invoices seems to be par for the course, and invariably many of us are either just too damn nice to put the foot down, or in some instances discouraged by sales from chasing too hard for fear of “upsetting the customer”. In a way it’s understandable, after all, the customer could be a key account or have taken weeks if not months to land, and so the last thing you want to do is jeopardise the relationship.

Whilst some customers can take their time to settle an invoice, or commonly in the case of larger businesses pay to their terms and not yours, they often supply you with a fair amount of repeat business, and so you are probably reluctant to rock the boat too much provided you’re aware of when the payment is going to be remitted.

However, that doesn’t ease your frustration at late payments which clog up the cash flow of your company.

If you want to ensure prompt payments, the answer may lie in how you construct your invoices. Putting more time and thought into your billing process can lead to a quicker turnaround time when it comes to collecting the cash.

Try following these tips for how to write effective invoices and get paid quicker:

Choose the right template

It may be hard to believe but every individual aspect of an invoice has an influence on how your customer views it. Chances are you will be using a well-worn invoice template from a software package. Everything from the layout to the font can be decisive when it comes to putting together an effective invoice. Font likes Helvetica and Arial are clean, clear and easy to read and are recommended when deciding on an invoice template.

An effective invoice should be uncomplicated and have the pertinent information clearly presented. Your invoice checklist should include:

  • Payment due date
  • The amount to be paid
  • The account to which payment should be sent
  • Description of the service or product provided – What is the invoice for?
  • Terms and conditions
  • Purchase Order Number where required

Make a date

An invoice should include a clearly defined due date which in turn will offer clarity and create a sense of urgency in the customer. These days, a lot of companies do confirm their payment terms on the invoices sent, or at the very least include some form of text advising that “payment is due 30 days from the date of invoice” for example. But with so many different payment terms available, (examples of which can be found at https://www.mycreditcontrollers.co.uk/Articles/list-of-invoice-payment-terms.html) including a clear due date avoids any confusion of when payment should be received.

There are however those businesses that don’t include their payment terms or a due date on their invoices at all. The reasons why can vary, from system capabilities, incompetence, or simply having the utmost trust and faith that the customer will pay their invoices in a timely manner – which just so happens to coincide with the suppliers standard terms of payment.

Whether you include the payment terms or simply believe that Jill in Accounts Payable has psychic attributes which allow her to know exactly when payment is due, confirming the actual due date on your invoices will undoubtedly help speed up the process and provide clarity to the customer. For example, if your invoice is dated ‘July 1st’ then you should confirm the due date as ‘July 31st’.

Consideration should also be given to the customers Accounts Payables processes too. Confirming whether a Purchase Order Number is required and including the relevant PO number from the outset will save both you and your client time, and furthermore help to reduce your businesses DSO.

By including the correct Purchase Order Number on the invoice, you will in effect reduce any potential payment delay as a result of not supplying the required information. Including not only a PO number but the correct PO number will unquestionably speed up the approval process and ensure that your invoice is in the system ready for payment. Including the Purchase Order number on your invoice from the outset will also remove the need to reissue the invoice once again, saving your Controllers time thus increasing productivity.

Carrots and sticks

Where there is a particular focus on cash flow you may wish to incentivise customers by offering a reduction on their invoice. Provided that the customer makes payment before the due date sliding scale discounts often prove favourable to both the supplier and customer alike.

For example, if your payment terms are 30 days from the date of invoice you may wish to consider offering a 10% discount provided that the invoice is settled within the first 7 days.

Invoices which are paid between days 8-14 may attract a 5% reduction.

Likewise, you should also reserve the right add additional charges for those who fail to pay by the due date as this will help offset any administrative costs you incur due to a late payment.

Push online payments

With an automated system you can program your invoice software to automatically send out statements and reminders thus encouraging and prompting customers to make payment of the balance outstanding.

Implementing Agile’s Online Payment System and including the appropriate weblink on the correspondence issued would enable your customers to make payments via a secure web-based portal online any time day or night, following which payments made via the Online Portal will be reconciled automatically onto your sales ledger / ERP system without any manual intervention from your Accounts Receivable team.

Providing such a simple and easy channel in which to make payment and obtain copy documents not only improves the customers experience, but also significantly improves productivity and efficiency within the Accounts Receivable function.

How long does it take your credit controllers to process and allocate payments?

Anyone working in any business has probably, at some point, rolled their eyes when they’ve heard someone barking the phrase ‘time is money’. It’s one of those clichés, however, that often turns out to be true. Waste time and you can also end up wasting money, or certainly reducing the opportunities of making more.

Time and money are also similar in that a little bit of either quickly adds up. So, if your accounts receivable team or credit controllers are taking between 5 and 20 minutes to process and allocate payments made by your customers, you don’t have to be a maths whizz to work out that this manual process ravenously eats into your valuable time. Each transaction may on average only take around 10 minutes from the point the payment is taken until it is logged in the system, but consider this, how many card payments do you process on a daily, weekly, monthly or even annual basis and then times those numbers by the average 10 minutes it takes your credit controllers to process and allocate those payments. The outcome?

If you run a busy office or are an SME you’ll know that maximising the limited resource available is a necessity and that any process that can significantly improve efficiency and free up more of your credit controllers time to focus on the reduction of DSO, bad debt provisions and the increase in cash flow is surely worth considering right?

So we know that allocating payments onto the sales ledger or ERP system is a time-consuming task. The arguments in favour of this manual method may state that it adds a useful layer of oversight into the system. That may well be the case, but the advantages of an automated allocation system far outweigh those of the manual equivalent.

For a start, automated allocation systems can actually reduce the risk of human error. Payment data is entered as soon as it is received and the automated process can quickly log it and file it where it needs to go, all at the touch of a button (or click of a mouse).

Businesses are constantly striving for efficiency and reducing time is a major step forward to improving that. However, efficiency isn’t just about doing things quickly, it’s also about completing tasks accurately, and in a way which seamlessly blend into your existing ways of working.

That’s why you should not only consider a payment allocation system that is efficient and delivers a significant cost benefit to your business, but also a system which is truly bespoke and compatible.

Agile Payment Solutions’ Online Payment Portal integrates smoothly with existing ERP systems such as Sage, SAP, Oracle, Microsoft Dynamics and other systems which may be bespoke to the industry in which your business operates. Our systems also integrate with payment gateways such as Sage Pay, Wordplay and Barclays to ensure all payments processed are fully PCI compliant.

So, we’ve ticked off time and compatibility, what other benefits does Agile’s automated cash allocation system and Online Payment Portal deliver? The ability for customers to obtain copy documents directly from the portal such as invoices and proof of deliveries certainly adds to the savings in time, but enabling direct access to such documents in real time also reduces operating costs and offers greater flexibility thus improving the customer experience too.
Furthermore, with the improvements in efficiency there’s no need for the business to worry about taking on additional customers as your Accounts Receivables team will be able to handle greater volumes without getting bogged down in the slow and cumbersome manual allocation process. They can confidently direct payment traffic to the new streamline system and avoid congestion, allowing the cash to flow much more easily.

So, if you are looking to save time and money, don’t waste another second, contact us now to arrange a no obligation of our Online Payment System.

Credit Control Available 24/7 – What are the benefits?

It’s ironic that technology was actually supposed to improve communication when you consider that some forms of tech have left many of us scratching our heads wondering what it’s all about.

Take the mobile phone. Remember when it was just a device used for talking to other people and playing epic games of Snake on your lunch break? Now it’s all emojis and incomprehensible acronyms like LOL, ROFL and TMI. Ah, TMI, I actually know that one – Too Much Information. Yes, sometimes it can feel like the world is throwing too much information at us. However, when it comes to running a business and keeping customers happy, there’s no such thing as too much information, only how customers obtain the information which can be the issue.

When a customer knows the information they require, wishes to make a payment against an outstanding invoice, or wants to tell you about a query that is preventing payment, how do they communicate with you and what actions do both parties have to take to achieve the desired result?

Normally, they would have to contact you during office hours to request the copy document, discuss their query, or make a payment over the telephone, all of which can be time-consuming exercises. Not that it should be a chore to deal with your customers of course, particularly when the end result leads to an outstanding invoice being paid. After all, getting paid for the products or services you have supplied is the main objective for your credit controllers, right?

But is there another way?

A way that is not designed to deter customers from picking up the phone and speaking to one of your team, but instead offers convenience, a reduction in operating costs, and an alternative method of obtaining such information and making a payment with little, if not zero impact on your internal resource.

With Agile Payment Solutions, credit control services are available 24/7. Customers are free to view and download all manner of documentation in their own time such as invoices and proof of delivery documents. Not only that, they can take actions such as making payments or even send details of a query that may be preventing payment directly to your Accounts Receivable team, allowing you to identify and resolve the issue sooner leading to payments being made more quickly. Payments made through the Portal will also be allocated automatically onto your sales ledger and ERP system, and this can all be done while your credit control team are busy with other jobs or even tucked up in bed at night (they’ll not take too kindly to a phone call at that hour).

It gives customers greater freedom too as they don’t have to rely on your office hours or someone picking up the phone to get things moving. They can happily get their business done at a time that best suits them and access the relevant information without making countless requests to your staff.

With round-the-clock credit control services, you become more attractive to both UK and overseas customers who are equally concerned with running their operation as efficiently as possible. It’s a win-win for everyone, even that poor, overworked office printer which always seems to need its toner replacing and the franking machine that needs another top up.

Offering direct access to customers and reducing the daily stream of requests into your Accounts Receivable team will undoubtedly result in your credit controllers time being freed up to chase the outstanding invoices, which in-turn will drive cash back into your business, reduce both your DSO and bad debt provisions, and ultimately increase the profitability of your business. And with the increase in productivity and efficiency there may even be time for an extra cuppa and another game of Snake, sorry, Angry Birds!