Many small businesses have found themselves out of pocket because customers don’t pay on time. It’s a common problem that affects many small businesses in Ireland. According to the Small Firms Association, small businesses generally have to wait an average of 62 days to get paid by creditors, despite requesting to be paid within 30 days.
The awkward position of being a bill collector is one that’s most hated by any small business owner. There are many reasons for this. The fear of alienating big customers, the time and effort it takes to follow up with late-paying customers or the deep-rooted feeling that it’s just not ‘nice’ to ask for the money.
However, with new technology like GoCardless, you can now get paid on time and make this whole task less odious. You can also minimise future collection problems by making use of the Direct Debit solution offered by GoCardless which we will discuss in detail. Before we delve into that, let’s first take a look at how late payments affect your business.
How Late Payments Affect Your Business
Late payments not only block the cash flow of your company but also affect the long-term security and capital you need to run the business. They also adversely impact your business’s ability to grow and evolve. Moreover, they also take up considerable additional resources in the form of time and money to chase after and get paid.
There are many reasons why customers may be late with their payments:
- Customers may have extended their payment terms without any prior consultation with you.
- They may have misplaced the paper invoice or missed you off their payment run.
- Customers may be facing financial problems with a poor cash flow themselves and don’t have enough funds to pay you back.
As a result of any of the above reasons, bad debts stack up and cash flow slows down. Small businesses and start-ups are unlikely to have enough financial capital to get out of these unwanted and unplanned cashflow holes.
This is where GoCardless comes in with their Direct Debit solution. Being an online Direct Debit specialist, GoCardless manages the entire collection process on your behalf. It is an online tool that makes it easy for your regular customers to pay you. Businesses can either collect and manage their payments using this simple online tool or can integrate with GoCardless’ REST API (Representational State Transfer).
GoCardless’ Direct Debit solution thus:
- Removes potential payment barriers
- Speeds up customers’ remittances
- Boosts your cash flow
GoCardless has numerous satisfied business owners. According to Steve Leighton, the founder of Has Been Coffee, “GoCardless gives us control over when we get paid and takes away the uncomfortable conversations about money.”
Possible Solutions to Get Paid on Time
So, what can be done about late payment problems? The answer is simple – devise ways to make it as easy as possible for your customers to pay you. A few ways you can do that are discussed below.
1. Set Up Easy Ways to Accept Payment
By using an online payment gateway such as Sage Pay, Braintree or PaymentExpress, or accepting GoCardless’ Direct Debit payments, you can remove a lot of hassle and administration pain for your customers. This can translate into quicker payments on time for you.
You can educate your customers on the benefits of paying by Direct Debit through GoCardless. These include:
- Quick, one-time set-up: Customers simply need to complete an online Direct Debit form, authorising you to collect payments from them on time.
- Safety and security guaranteed: the customer’s payments are fully secure through GoCardless and Direct Debit customer protections.
- Flexible payments: You can mutually decide on payment schedules that work for each customer. They can authorise individual payments if need be.
2. Switch to a Regular Monthly Fee
Monthly packages or retainers spread the cost for the customer and provide you with a more regular cash pipeline.
3. Use an Accounting System With an Online Invoicing Feature
This way, you can email invoices directly to the customer and avoid the chance of a paper invoice getting lost in the post.
GoCardless – How It Revolutionises Your Payments
Unpaid invoices or late payments can have a huge negative impact on your business as discussed above. GoCardless’ Direct Debit solution offers a host of benefits for you as a merchant. With this simple and cost-effective way to take payments, it is you who initiates payment collection. This ‘pull-based’ nature of Direct Debit has considerable benefits for you:
- Automation: The whole collection process can be automated. This reduces administration time for you and your customers.
- Cashflow: You are in control of when you are paid and can reduce the number of late payments you receive. Direct debit allows you to collect funds automatically on designated payment dates. This also helps you predict future revenue for your business at any date.
- Flexibility: Direct Debits allow the payment frequency and amount to be varied. You can use it to collect one-off or recurring payments, unlike standing orders. This keeps you, the merchant, in control.
GoCardless is also free to set up with no minimum term. They just charge 1% of the transaction amount with no hidden costs or fees. With GoCardless, you:
- Have an easy online setup and authorisation
- Get paid on time, every time
- Collect payments easily across Europe
- Benefit from the fact that it is integrated into popular accounting software like Xero, Sage, and QuickBooks.
Conclusion
With GoCardless in charge of collecting your payments, you can be assured of timely payments. This avoids a huge amount of hassle of managing your outstanding debts. You no longer have to waste precious time on debtor tracking or chasing customers over the phone. Not only that, but you will also always know that there is money in the bank, all year round.
With the help of this new technology, you can stop worrying about when your next payments will arrive and focus on managing your daily business activities well.
