How much time and money could you save on payment collection?

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If you think you spend too much time and money in your business on payment collection and associated administration, you are probably correct. One of the biggest contributors to this is the payment methods used, as using ones that aren’t well suited to your business type can result in unnecessary costs.

Using pull-based payments, GoCardless puts your business in control of when you get paid, eliminating late and failed payments and automating financial reporting - all at a lower time and money cost than your current payment methods.

1. Save time chasing late payments

Invoices are a common way to request payments, particularly if you are a B2B business. However, accepting invoice payment via a manual and more traditional payment type, such as a bank transfer, cheque or one-off card payment, can lead to multiple problems.

Manual payment methods can lead to one of the most stressful issues that businesses face - late payments. On top of the cash flow problems that late payments cause, businesses are required to divert valuable resources to chase the payments and deal with the associated admin. The average UK SME spends 30 hours a month chasing late payments.

Automated payments are a great solution if you have repeat customers with regular or known orders. For example, if you offer plans or subscription services. We know that bank payments are the preferred way to pay invoices by both businesses and consumers, which gives you the option of using standing orders or Direct Debits to automate your recurring payments.

2. Save time on regular financial admin

Invoices create a lot of manual admin, even when they are paid on time.

Invoices must be created, sent, and then manually reconciled when paid, which requires significant amounts of time to be spent on accounting admin; the same is also true if a business uses credit or debit cards to collect payments.

For businesses collecting payments via credit or debit cards, the high failure rate of card payments creates further admin, including the time spent recovering these failed payments and completing manual bank reconciliation.

 Sole traders and SMEs can spend between 19% - 31% of their total weekly work time dealing with payment admin due to inefficient ways to collect and manage their money. One way to significantly reduce the amount of admin and manual reporting you need to do is to integrate your payments into any accounting software you might use. So if you use accountancy software then you should also look to choose a payments provider that can integrate with it. This would bring all of your reporting into one place and give you an easy way to see all of your payments without going between systems and spreadsheets.

3. Save money trying to recover failed payments

Different payment methods have different average failure rates. For example, did you know that card payments fail up to 15% of the time? This can result in missed payments, added admin, and unhappy customers who thought they had already sorted out their payment or now feel embarrassed by being chased to pay. There are lots of different reasons that a payment can fail, for example with cards they can be lost or stolen, and they also have expiry dates which means the payer needs to re-submit and authorise payments from their new card instead. Some payment methods may also have a limit on the funds available to withdraw or require authorisation each time a payment is made.

The monetary cost of chasing late and failed  payments can be 11% - 15% of the value of the recovered funds and in 202252% of small businesses experienced late payments, so take a look at the payment options available and research their failure rates to give you an idea of how much they could cost your business overall to manage.

4. Save time and money trying to retain customers

There’s a direct link between failed payments and customer churn. Simply put, churn refers to the rate at which customers are ending their use of your product or service. Churn can be voluntary (active – a customer has chosen to cancel their subscription) or involuntary (passive – a customer’s payment has elapsed without them knowing about it).  Whilst customer churn is inevitable, if you’re using a payment with a high failure rate then you’ll likely end up spending a disproportionate amount of time tracking and managing payers, maybe even losing more money giving them a gesture of goodwill or an incentive to stay with you.

Managing all of the hidden costs

There is a lot more to managing payments than just the upfront fees. But if you do your due diligence upfront and choose a good mix of payment methods that suit your business type, you’re more likely to mitigate future risks and avoid spending resources on admin or customer issues. Just remember - different payment methods come with different risks and requirements, so don’t treat them as a one-size-fits all.