Earlier, there seemed to be no end to the excuses that businesses had to put up with for every late payment made by their customers. And as a business owner, you know firsthand how crucial your customer’s payments are to your cashflow. Mixing your cashflow with late payments, or in some cases no payment at all, would just disrupt the entire process. But now, when new ways to transfer money pop up almost everyday, it’s about time that same-day payments can finally happen.
An example of a new payment method in India is UPI, a simple system that allows funds to be transferred between two bank accounts, instantly. On its own UPI makes the entire payment process easier for both parties, sender and receiver, but for a business there’s a lot more going on than just payments. So instead, UPI can further benefit your business when it is combined with an online accounting software on the side to manage your payables and receivables, keep your books up-to-date, and take care of repetitive jobs that you would normally spend hours on. One such accounting tool is Zoho Books, a GST-compliant software that bundles up all of your business’ tasks like sending and receiving invoices and bills, reconciling bank transactions, tracking inventory, generating reports, and filing returns into one. Read on to learn more about UPI, what it is, how it works, how it compares with other payment methods, and how it works with Zoho Books.
What is UPI and how does it work?
UPI (Unified Payments Interface) is an easy-to-use payment system that simplifies the process of transferring money between two bank accounts and brings it into a single mobile app. Through UPI, you can make or request a payment, check your account balance and transaction history, change or set a mobile PIN, receive notifications, manage multiple bank accounts, and much more. Since UPI is built using IMPS (Immediate Payment Service) technology, it offers features from both, such as instant transfers, 24*7 service, the ability to pull funds from bank accounts, and single-click two-factor authentication.
Users who want to be able to make UPI transactions need to start by creating a VPA (Virtual Payment Address) or UPI ID. A VPA is an address or identifier that is generated every time you link a new bank account to your UPI mobile application. After you’ve created a VPA, you can share it with another person to allow them to transfer funds into your account.
There are several apps available to facilitate UPI transactions, such as BHIM (Bharat Interface for Money), Paytm, and Google Pay. Download the app of your choice and link it to your bank account (this process may vary from app to app). Then make your payment:
Step 1: Select the option to pay money and enter the receiver’s VPA.
Step 2: Enter the amount you want to transfer.
Step 3: Click Send and confirm the details of the transaction.
You have successfully made a UPI transaction! If you wish, you may add any comments or suggestions to the transaction now.
How does UPI compare with other online payment methods?
UPI offers a lot of benefits over other payment methods.
Very few payment methods can complete transactions quickly, which makes UPI stand out. Funds are transferred instantly, and UPI is also available around the clock every day, even on Sundays and bank holidays.
UPI transactions are less time-consuming than NEFT/RTGS/IMPS, mobile wallets, and even netbanking, and does not require as many details. The initiator only needs to have access to a smartphone and the receiver’s VPA, and they are good to go. By using a VPA to initiate payments, UPI means that people don’t have to remember and enter details such as their bank account number, IFSC code, and netbanking PIN and password.
UPI allows you to make or receive payments using multiple bank accounts. You can either register multiple bank accounts under a single UPI application, or use a single bank account with multiple UPI applications. You may have different bank accounts to be used for different purposes, so by linking them to the UPI application, you can choose which account you want to use to either make or receive a particular payment.
Transaction fees and limits
Compared to NEFT/RTGS/IMPS, UPI transactions are more affordable, costing only around Rs 0.50 for each transaction. The UPI system offers generous transaction limits: up to 10 transactions, worth a maximum of Rs 1,00,000 per day, which is much higher than mobile wallets and NEFT payments.
What can the combination of UPI and an accounting software do for you?
Let’s suppose that your business is considering using UPI to make transactions. You need to do more than just collect customer payments; you also have to settle your own bills and expenses, manage your books, record and keep track of payments, and follow up with customers about payments due. With a hectic cycle like this, your business would benefit from using an online accounting tool like Zoho Books in addition to UPI.
Zoho Books helps you automatically complete the tasks that go along with collecting payments. Send out friendly reminders to your customers to get them to pay, collect the payments, record them in your books, and even reconcile your bank statements with transactions you’ve made using your UPI app.
How does UPI work with Zoho Books?
Collecting UPI payments through Zoho Books is really simple. Integrate Zoho Books with either ICICI or Razorpay and send out invoices like you normally would through the software. A payment link will be included in each invoice, and when the customer clicks it, they will be prompted to enter their VPA. They will also receive a payment request on their UPI app, which they just need to accept and the payment will be made. The customer also has the option to make their UPI payment through the client portal instead. After the payment goes through, the status of the invoice is automatically updated to paid.
What are the benefits of using UPI with Zoho Books?
Combining UPI and Zoho Books can help you through some tricky situations you may have trouble with:
Not all customers pay on time. In fact, it’s probably safe to say there are more customers who do not pay on time than those who do. One of the biggest advantages to using UPI with Zoho Books is that you get to cut down the amount of time you spend chasing after customers for payments. You can set up automatic workflows to send customized emails to your customers before their payments are due.
You sometimes find yourself waiting for the actual payment to appear in your bank account. That’s because the most common modes of customer payments all take some amount of time before they finally reach your account. But with UPI technology, after the customer accepts the transfer request, the money is instantly transferred from their bank account into yours.
Getting your customers to pay you is tough on its own; what’s more your responsibilities don’t end even after your customer pays you. For every payment you receive, you will still have to record the transaction and reconcile your bank statements. With Zoho Books, every time a customer makes a UPI payment, the status of the respective invoices gets updated automatically. If the payment is successful a payment receipt is generated. Zoho Books also helps simplify your bank reconciliation process and categorise your bank statements. You can fetch your bank statements automatically using bank feeds. You can match the transactions in your bank statements with the transactions that you’ve created in Zoho Books automatically using bank rules. This significantly reduces the time spent on your reconciling process.
With a growing business, it will definitely become difficult for you to keep track of missed payments. Over time, all these payments can sum up to a larger amount, resulting in a bigger loss for your business. Zoho Books offers several reports based on your business overview, sales, payables, receivables, inventory, bills and expenses, and more. With this feature, you can run up-to-date financial reports of your business instantly. They let you know which of your customers are more prone to late payments, which can help you solve this issue better. They also help give you an idea of how well you are doing, and what areas could do better, so that you know how you can improve your business for the following financial year.
Late payments are a pain that most businesses have faced at some point. If you are still looking for the right way to cope with them, UPI transactions offer a cost-efficient and convenient solution. By combining them with Zoho Books, you get a payment alternative that facilitates instant transfers of funds and gets you paid on time, plus an accounting system that automates your invoices and keeps your accounts up to date.