You have to wear lots of different hats when running a small business. From being the general manager, a customer services agent, and even acting as the day-to-day accountant. The latter can end up taking up too much time, leaving you unable to prioritise other areas of the business or working even longer hours to compensate. If this sounds familiar, then know that you aren’t alone. On average, UK small businesses spend up to 6.7 hours a month chasing late payments and over 5.5 hours a month reconciling them. This doesn’t include the time spent requesting and setting up new payments.
Leave manual money management in the past
Manual money management not only uses up your time and resources, but it can also leave you more exposed to human error if you’re not an accountant by nature. Automated payments might sound more complicated or costly, but they can actually save you money by reducing the time and resources spent on manual tasks. They can even help you spot failed payments before they become a bigger issue.
So, what do we mean by automated payments? The simplest example is Direct Debit. It may have been around since the 1960s, but Direct Debit is one of the most reliable and trusted ways to collect repeat payments. The money is pulled directly from one bank account to another, with the amount and frequency agreed during the initial set-up. There are minimal intermediaries behind the scenes, keeping costs low, and they will continue to move the money as desired until one of the parties cancels the agreement.
The many benefits of automated payments
Let’s take a look at the wider benefits it can offer your business.
Set once and forget
This is one of the greatest benefits of automatic payments for both the business and the customer. Businesses gain peace of mind from knowing that the payment is in place and will come into their account on a known date. Customers don’t have to remember to send money each time they make a repeat purchase, and the relationship benefits by being free-from annoying chaser and reminder notifications.
The extent to which you can “forget” a payment depends on the payment method you’re using for automated collection. For example, Direct Debit can run as desired for as long as there is a customer-seller relationship in place. If there is a change in pricing or frequency then the business can adjust the amount themselves without the customer needing to cancel and re-athoruise. However, if you choose to automate card payments then there are expiry dates and a higher risk of the details being lost or stolen, resulting in the need for any payments to be cancelled and re-set up.
Predictable cash flow
On average, UK small businesses are paid up to 18 days late. There’s the upfront concern of people using services or products without paying for them at all. But even when your business has a long-term customer that can be “trusted” to pay (eventually) there's the additional funds lost to spending time and resources pursuing those payments. Manual money management can become labour intensive, draining time, money and can even result in negative customer-business relationships.
When you don’t have a set payment date in place, the knock on effect is your business is unable to invest in necessary stock or deliveries, and then pays its own suppliers late. 80% of SMB owners are unsure if they can pay their own invoices on time, and a further 89% saying the uncertainty around money coming in and out led to increased stress and anxiety.
This poor visibility can drive a chain of negativity - with suppliers chasing your business for payments, and your business chasing customers.This quickly becomes frustrating for all involved and it can sour those all important relationships, even contributing to losing customers.
Bringing customers on the journey with you
Once you’ve opted for an automatic payments provider, you’ll need to let your customers know that they can now save time and effort by paying with automated payments. It’s important to let them know the bigger benefits of the change, helping them to understand how it’s a positive for them and for your business. Pre-empt any questions you may be asked about set-up and make the answers readily available.
If you haven’t changed your business processes for a long time then it may be worth offering incentives for customers to try out automatic payments. For example, early adopters could be offered a small percentage off their invoice for the first month.
It can be tempting to put off making business changes, especially when it directly impacts money. But the reality is that the longer issues are left, the more they’ll grow until they reach a crisis point. If your cash flow has you planning month-to-month and unable to think longer-term, then moving to automatic payments could be the change you need.
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GoCardless provides simple and secure direct bank payments to over 85,000 businesses worldwide – from sole traders and small businesses to familiar household names. Their mission is to offer businesses a better way to collect recurring and one-off payments, helping them to get paid on time, every time.