Wouldn’t it be great if you had more control over when your customers paid you? Think of all the administration time you could avoid, the countless hours saved. It’d be great for your stress levels too, with less worrying about whether you can cover your overheads for the month and none of those awkward phone calls to chase overdue invoices. The solution is to offer Direct Debit payment. Find here six reasons as to why it is the sensible thing to do.
Late payments are a problem for businesses. Not only is this a strain on cash flow, but a source of significant stress. What is even worse, is that late payments are putting their business at risk.
So why does this happen? A key reason is that most invoices tend to be paid by manual bank transfer. This puts control over when payment is made with the customer, not the business owner. And relies on the customer finding the time to complete this manual task.
Recurring business models can range from regular billing like subscriptions, retainers and instalments, to invoicing the same customers multiple times over the year. Recurring billing models are growing fast, driven by a rise in subscription-based services, plus the shift to online billing amplified by the COVID-19 pandemic. Even if you have a set of customers that pay you throughout the year, but amounts always differ, you still have a recurring business model.
Many of the bills generated in invoicing or accounting software are recurring. When you have a recurring revenue business model and late paying customers, this can quickly snowball into a serious cash flow problem.
It doesn’t need to be this painful. Most of the issues businesses face around recurring revenue and late payment can be solved by offering your customers an easy, safe and hassle-free way to pay on time. And that’s where Direct Debit Payment comes in.
If you have a recurring revenue business or struggle with late payments then it could be time to set up Direct Debit payments. Here’s why:
By using Direct Debit to collect payments, the whole process is taken care of automatically. That means you can be confident about your cash flow and covering your business expenses. It also means you don’t have to deal with the hassle of chasing customers for payment.
The secret to running a successful recurring revenue business is automating your billing process. Use your accounting software to automate sending invoices, and a service like GoCardless will automatically collect payment for them when the bill is due.
With this method, setting up a customer to pay is easy. Select a customer and send them a link from your account. They then enter their payment details securely online, authorising you to collect payments from their bank account. They only need to do this once and then you’re set to collect payments without either of you having to lift a finger.
There’s no need for them to re-enter bank details or make payments over the phone, making it a much smoother experience for both of you. Some recurring payment services allow you to remind your customer in advance of payment collection too.
Bank-to-bank payments cut out the costs of card networks, making for a more cost efficient way to get paid. And by getting paid on time automatically, you also reduce the costs involved in chasing and managing payments.
For example, GoCardless keeps the price down further with a pay-as-you-go pricing structure and fees starting at 1% + 20p, capped at £4 per transaction.
When it comes to paying invoices, Direct Debit is the preferred alternative to manual bank transfers for businesses in the UK and Australia. In the US, after credit cards, Direct Debit is the preferred way to pay invoices. (source: GoCardless B2B Payment preferences report)
_75% of all recurring payments in the UK are taken via Direct Debit _
You can use services like Gocardless to collect payments of varying amounts__, and on fixed or variable schedules. When connected to a partners software, GoCardless and other payment services are automatically scheduled based on the invoice due date, and it will automatically collect whatever payment amount is due on your invoice.
In the UK, the Direct Debit Guarantee gives your customers complete cover for payments taken in error or fraudulently, making Direct Debit amongst the safest payment methods to use.
A service provider like GoCardless allows you to collect recurring payments via Direct Debit. Your customer only needs to provide their payment details once, authorising payment services to collect all future payments without further action from them. Then when your invoices are due these services automatically pulls payment from your customer’s bank account to yours. This removes much of the admin associated with other payment methods, making it a hassle-free way to control your cash flow.