4 key insights from our new Forrester Consulting thought leadership paper
Last editedNov 20203 min read
GoCardless recently commissioned Forrester Consulting to evaluate the state of recurring payments across the globe. Forrester conducted an in-depth survey of 700 payment decision-makers in businesses with B2B revenue streams (either B2B-only or a combination of B2B and B2C). The survey included businesses from the US, UK, France, Germany and Australia; looking primarily at SaaS, financial services, business services and IT/technology industries. Every business in the survey has an annual revenue of over $100 million.
We’re delighted to launch the full thought leadership paper, titled:
You can download the full paper here. But if you’re just after the key insights - the most important lessons you should take back to your own business - then read on. We’ve compiled four of the biggest takeaways from the paper, as well as how the data looks in the UK, specifically.
1. The current recurring payments landscape is convoluted, causing serious operational challenges
We live in a world where technological advancements drive businesses to change how they add value to their customers. And modern business is changing the way B2B and B2C payments are made. But, as more merchants change their business models, sell in more countries, and accept more payment methods, the payment landscape has become convoluted. For example, over 60% of payment decision-makers say that the most time-consuming areas are matching payments to invoices and reconciling reporting from different gateways/processors. This shows just how much of a drain recurring payment operations can be without the right payment processor(s).
It’s, therefore, no surprise that many firms have large teams to manage complex payment operations. 86% have more than 20 full-time employees (FTEs) to handle recurring payments. In the UK, on average, businesses have between 30 and 40 FTEs/people responsible for receiving payments.
2. Slow payment intake is a particularly tricky challenge for many businesses
4 out of 5 firms say that it takes them more than a month to receive payment, and the average days sales outstanding (DSO) in the last 12 months is over 20 days across their payment methods. In the UK, the average DSO is 20-30 days. And DSO seems to be getting worse. For businesses with B2C revenue, DSO has increased the most over the last 12 months for payments collected by digital wallets. And, for B2B businesses, DSO has increased over the last 12 months for payments collected by bank/wire transfers.
But what’s causing these high DSO numbers? To put it simply, a combination of complex banking rules and procedures and time-consuming manual processes. 60% of firms said that matching payments to invoices and reconciling reporting from different gateways/processors is a huge inconvenience. And 77% of respondents say that reducing DSO is high or critically high on their agenda for 2021.
3. Businesses typically have high failure rates, affecting the bottom line (while also increasing churn and bad debt)
One standout finding from the Forrester shows that half of all businesses have a failure rate of higher than 7%.
This is roughly in line with our own Payment Success Index, which found businesses primarily collecting using credit cards have failure rates of 7.9%. On the other hand, GoCardless payments (powered by bank debit), have average failure rates of just 2.9%.
The results not only prove how widespread the problem is but also the knock-on effects that high failure rates can have on a business’ overall success. For example
On average, businesses with B2C revenue see 11%-15% of their failed payments turn into bad debt (in the UK, the figure is 16-20%)
On average, B2B businesses also see 11%-15% of their failed payments turn into bad debt
On average, Failed payments result in churn 11%-15% of the time
On average, B2B businesses spend 16%-20% of the payment value to recover the payment.
On average, Businesses that are a mix of B2B and B2C spend 11-15% of the payment value to recover the payment
In short, failed payments can quickly become a drain on the bottom line if not kept under control.
4. Businesses recognise the importance of recurring payment solutions when optimising their payment strategies.
Businesses are finally starting to realise that payments need to be treated as a strategic imperative, rather than a cost centre. In fact, nearly 60% of firms are planning to invest in or expand/upgrade investment in recurring payment providers.
By adopting upgraded recurring payment solutions, organisations are aiming to drive growth and deliver excellent customer service. This means these same organisations expect several benefits from their investment, including:
Improved customer retention (44%)
Reduced payment failures (41%)
Reduced churn (38%)
Reduction in DSO (43%)
Less time chasing unpaid invoices (40%)
Forrester Consulting: Rethink your payment strategy
Download the full report for all the important insights, as well as recommendations on how businesses can meet ever-evolving payment challenges.
Could GoCardless be your new recurring payments partner?
As mentioned above, investing in a recurring payments provider is a key focus for many businesses. To find out more about how GoCardless can help improve your DSO, payment failures, involuntary churn and more, click here. If you’d like to discuss your recurring payment challenges in greater detail, have a 15-minute chat with one of the team to see where GoCardless can help, and how your business compares to other important industry benchmarks.