Is Open Banking the biggest change in banking for a decade?
That was the question posed to the CEOs of Plum, Zopa, Starling Bank, and GoCardless last week, by Balderton Capital’s Rob Moffat at our panel discussion on the impact of Open Banking.
In this blog, we’ll cover the highlights of that discussion; including our panellists views on the current state of Open Banking and the opportunities for fintechs, as well as their predictions on what’s to come.
The current state of Open Banking
Services enabled by the Account Information Service (AIS) are the first off the blocks, though most license applications to date have come from fintechs in the lending space.
Zopa is one of those businesses. While, like many fintechs it has historically used Screen Scraping, new regulatory technical standards in Europe will stop that practice by September 2019.
So how are businesses like Zopa planning to use Open Banking APIs?
The retention challenge for gyms
UK gyms face a retention challenge, with half of all members leaving each year and alternative exercise and pay-as-you-go options on the rise. See the startling stats in our infographic below, including how much payment failures are costing gym & fitness businesses each month.
Goodbye, card surcharges. Hello, Direct Debit. Why the travel industry must offer alternatives to card payments
At the start of the year, millions of Britons escaped the grip of winter by flying to warmer climes. At the same time, a different kind of chill was descending on the holiday industry.
New pan-European legislation came into force at the start of the year banning surcharges on credit and debit cards, a move that hit many businesses’ profits hard. But holiday firms, with their big-ticket products and already slender margins, were affected more than most.
Plastic is still the most popular way to cover vacation costs for many people. Consumers spent £19.3 billion on credit cards with travel agents between January and October last year, according to the latest data from UK Finance.
It’s obvious why customers like cards – they’re accepted everywhere, easy to use and provide extra protection if things go wrong. The travel industry liked card payments until January, too – prior to the ban, travel firms typically charged customers who paid by credit card 2 per cent, roughly what they themselves were being charged by the banks to process those payments.
It may not sound like much, but cutting that 2 per cent surcharge equates to an equivalent loss of £385 million to the UK travel industry over that January to October period.
What the gig economy means for the self-employed
The world of work is changing. An ever increasing number of people are becoming self employed and are responsible for generating their own work - and getting paid for it.
Over the last decade the number of self employed people in the UK has risen 24%, from 3.9 million to 4.7 million.
Intuit predicts that 40% of all American jobs will be 'gig-economy' based by 2020.
These changes have been facilitated by technology, with smart devices and ubiquitous wifi making it easy for individuals to transact in the digital economy.
On top of this, 'gig economy' platforms such as Deliveroo, Uber and AirBnB are providing freelancers with the opportunity to top up their income with short term contracts and one-off jobs.
Gig economy assignments and longer form freelancing opportunities have clear benefits such as flexible hours and the opportunity to strike a better work/life balance. But they also have their own set of unique challenges, including getting paid on time and the lack of workers rights.
In this blog, we take a look at some of these pros and cons in more detail.
Unpaid invoice? How to have THAT conversation with your client
Accountancy firms might spend their days advising clients on their finances, but even they are aren't immune from the problem of late payments. The average professional service firm is owed £54k in outstanding payments, according to new research by data specialists Dun & Bradstreet.
Having a challenging conversation with your client about money isn't most people's idea of fun, but most small firm leaders will need to do it at some point. With that min mind. we've compiled some tips to help you chase your client’s unpaid invoice (without chasing your client away).
Start the conversation (early)
When chasing an unpaid invoice, it’s important to remember that payment is already late. So, don’t procrastinate. By making contact with your client as soon as the invoice becomes overdue, your firm may be able to close the payment gap by presenting more flexible payment options, such as changing the payment date or offering instalment payments through Direct Debit. Whilst alternative payment routes don’t guarantee payment, they do move the dial in the right direction.
Structure the conversation (clearly)
Often, a client who is trying to delay payment will wait until payment is due before advising you that they didn’t receive your invoice.
1-3 days late
Your firm has delivered a service, your client hasn’t paid for it and all you can hear are crickets. So, it’s easy to think that non-payment is intentional, but it may not be. Genuine oversights happen all the time, so give your client the benefit of the doubt (especially first-time offenders).
Once the invoice payment deadline has passed, a junior staff member from your Accounts department should give your client a gentle nudge by sending a firm – but friendly – email with a copy of the invoice attached. The email should say that payment is overdue and your client must arrange payment as soon as possible or contact your firm if they’re in financial difficulty. More often than not, a subtle reminder is all that’s needed to spur an otherwise motionless client into action.
7 days late
5 common excuses for late payments (and how to respond to them)
If you’re delivering services on time to your clients, it can be frustrating to be met with excuses for late payment, which typically fall into one of four categories: systems error, supply chain, company crisis or dispute.
Here’s five of the most commonly-used excuses for not paying invoices on time, along with our tips on how to respond, so that you get the money in your bank ASAP.
“We haven’t received your invoice”
Often, a client who is trying to delay payment will wait until payment is due before advising you that they didn’t receive your invoice.
Response: Send your client an email asking for confirmation of receipt of your invoice – for example, seven days after dispatch. Or you can ask your client to send you an email acknowledgement upon receipt of your invoice. Either way, you’ll have time to re-send your invoice, if necessary.
You can also send a reminder email to your client one week before your invoice is due for payment. This will give you an electronic paper trail, which will prove useful if you later have to take formal steps to recover payment.
If your invoices are regularly going astray, you may want to switch to Direct Debit, which prevents late payments by automating your firm’s payment process – removing the hassle of your clients having to manually pay your invoices.
“Your cheque is in the post”
Nowadays, it’s unlikely that your firm is paid by cheque, but the general principle is that “payment is on the way.”
Response: Ask your client for proof of postage or ‘remittance advice’ (a letter from their finance department proving that payment has been made).
Alternatively, you can request that your client cancels the first cheque and sends another one by first class recorded delivery.
On the other hand, why not offer your client an online, automated payment option like Direct Debit? Funds will be instantly debited from your client’s account, leaving your team to focus on your work (rather than invoice-chasing).
“We haven’t been paid by our clients yet”
Duty to report on payment practices legislation: gaining traction or falling flat?
A survey by MarketInvoice on 80,000 invoices from UK businesses revealed that 62% were paid late in 2017, up from 60% in 2016. On average, SMEs are paid 18 days late, with £21.1 billion outstanding in late payments annually.
Enter the duty to report on payment practices and performance legislation. This is in effect an extension of the Prompt Payment Code, which was established in 2008 and under which many large companies were already voluntarily publishing their payment policies online and following standards for payment practice.
The new legislation, however, means that all companies over a specified threshold (turnover, balance sheet total, number of employees) need to report on their payment record. The Government is taking further action to support SMEs with a new complaint service on late payment and the newly appointed Small Business Commissioner.
Are things looking up?
So, are we seeing real, tangible results?
“Whilst the regulations came into force in April last year, the reporting obligation is linked to each company’s financial year, so not every company within scope was required to take action immediately. It’s also not entirely clear that every company with a duty to report is fully aware of that fact, as I wouldn’t say the regulations have been particularly widely publicised,” says Oliver Kidd, Senior Associate, Stevens & Bolton.
The recent collapse of Carillion highlights the size of the task at hand. The company’s Supplier Payment Guide says that it is “committed to paying our suppliers in accordance with agreed payment terms. In order to avoid unnecessary delays and any processing difficulties, it is essential that processes are followed and consideration should also given to some of the tools we have to help improve payment performance.”
There then, somewhat predictably, follows a long list of processes. Rumours had been swirling for some time that Carillion was a late payer of bills. Worse still, creditors of the company could now end up with less than a penny in the pound, official court documents revealed.
A High Court witness statement submitted by the interim Chief Executive, Keith Cochrane, on the company’s liquidation notes the “insolvency recovery for creditors in the event of a group-wide liquidation would be an average of between 0.8p in the pound and 6.6p in the pound”.
Federation of Small Businesses National Chairman Mike Cherry, said: “It is vital that Carillion’s small business suppliers are paid what they are owed, or some of those firms could themselves be put in jeopardy, putting even more jobs at risk besides those of Carillion’s own employees.”
He added that these unpaid bills may well go back several months. “I wrote to Carillion back in July last year to express concern after hearing from FSB members that the company was making small suppliers wait 120 days to be paid. Sadly, these kind of poor payment practices are all too common among some big corporates. Perhaps if they weren’t it would be easier to spot the warning signs of a huge company in financial trouble.”
What are the public findings so far?
Late payment is more than a headache: it could be the sign of a failing business
Any business owner knows that getting paid on time is essential to cash flow, but late payment isn’t just an inconvenience. It can be a sign that a firm is out of control of its finances, not making a profit, and even on the verge of failing altogether:
- More than a third of SMEs are regularly paid late, with British firms owed £14.2 billion last year, according to Bacs.
- Two out of three companies have cash reserves of just three months or less, research by The Wow Company has found.
- About 50,000 SMEs shut up shop every year due to late payment, findings from the Federation of Small Businesses show.
If you’re not getting paid on time, and cash flow is sluggish, there’s a greater probability that money will run out, and serious trouble may not be far behind.
So what can small business owners do to protect their businesses from this common problem?
Record year for Direct Debit in the UK
Last week Bacs released its 2017 payment stats, showing another record-breaking year for Direct Debit in the UK.
As Bacs CEO Michael Chambers says, these huge volumes of transactions happen largely out of sight: "As long as that payment arrives on time and those crucial bills aren't missed, that is as much as we will think about the infrastructure which underpins it all." And of course, that's part of the beauty of the Direct Debit 'set and forget' system.
GoCardless also celebrated a milestone this week - our 7th birthday, so we have added some of our own stats to those from Bacs below. We're delighted to be working with more customers than ever before and to see our customers prospering (in 2017 we processed more of your payments than the previous six years put together).
We look forward to beating these figures this year!
5 things for accountants to focus on in 2018
It’s January, busy season is coming to an end and it’s time to start putting serious thought into the year ahead for your accountancy firm. So, what should be on your radar for 2018?
As a modern accountant, you’re riding the wave of evolutionary change taking place in the industry, utilising the most valuable fintech and cloud apps to create a practice ‘app stack’ that brings maximum efficiency to the firm.
Meeting the expectations of your clients is also a focus – offering the kinds of advice, service and long-term trusted relationships that are now seen as the norm by the new wave of ambitious, tech-savvy business owners.
So, to help you plan ahead with confidence, we’ve highlighted five key things to put on your 2018 to-do list – keeping you, your team and your clients ahead of the curve.
1. AI and automation – an opportunity, not a threat
The threat of accountants being replaced by software ‘robots’ has been a common theme over the course of the preceding year. But 2018 is the year where artificial intelligence (AI) will go from being fiction to a practical reality for a large number of practices.
Many of the leading accounting software providers – Xero, QuickBooks and Sage included – are incorporating practical elements of AI and machine learning into their offerings. And the key takeaway here is that your role as an accounting professional won’t be replaced by an algorithm – AI will sit there in the background doing the mundane data entry, coding, data analysis and automating of financial admin – giving you more time to focus on value-add services.
So, dig down into the latest product releases from your accounting and fintech providers, and see where AI can save you time, improve your automation or bring you high-level analysis.
Find out more of the benefits of AI for accountants in this post from Boma Marketing.
2. Being ready for Making Tax Digital and digital accounts
The importance of good cash flow for start-ups: a conversation with Saija Mahon
Four in ten start-ups fail in the first five years of the business and a significant factor behind that high failure rate for early-stage businesses is a reluctance to manage cash flow effectively.
We sat down with Saija Mahon – founder and MD of Mahon Digital Marketing, business mentor and speaker on the international start-up conference circuit – to talk about start-ups attitude to financial management, spending investors money and why getting a handle on cash flow should be every founder’s key focus in the early years of the business.
Setting the right financial foundations
The initial years of running a start-up are a challenging time for any founder. There’s the excitement of creating your business idea, getting it off the ground and seeing those first sales rolling in.
But what many inexperienced entrepreneurs forget is the need for rock-solid financial foundations.
As a business mentor and a speaker at start-up conferences around the world, Saija Mahon has seen first-hand how a good start-up idea can be held back by poor cash flow – and how relying on cash from an investor can actually be a bad idea for some start-ups.
“I see this lack of cash flow management all the time, where start-ups don’t focus on getting financially stable. Many get so excited about their new product or offering – which is obviously great – but then they get lost in the investor world and forget about their core customer who would buy their idea, product or service in the future.
That pot of investor money is finite – ultimately you need customers to buy your products.
One part of this, certainly from what I’ve seen, is that start-ups don’t focus on the customer enough, or building up their go-to-market strategy – they think that the investor will pay anyway.
Yes, in the short-term, that works but not in the long-term if you want to be here in ten years time. You can’t just think that your investor will always be here, because they won’t.”
Investor money is a finite pot of cash
In the entrepreneurial world of growth hacks, pivoting and hyper-growth, it’s easy to see how start-up founders can be lured into thinking more about investment money than day-to-day income. But to quote the well-worn phrase, cash flow truly is the lifeblood of a healthy business.
Getting SMEs ready for the year ahead
For small business owners, the start of a new year is a valuable opportunity to take stock and to plan ahead.
And there are many practical efforts SME bosses can make to ensure their businesses are efficient, improving, and profitable over the months to come. Here are our top tips for financial health in 2018.
Learn from 2017
How did your business perform during the last year, and what might have been done better?
- Undertake a thorough review of financial statements of the past 12 months, scrutinising profit and loss figures, plus sales peaks and where sales were in decline. Ask yourself what caused these fluctuations, whether they were inevitable or seasonal, and if you could have planned better for them.
- Analyse stock levels and turnover to see if inventory management is up to scratch.
- What does the detail of the company’s revenue versus expenditure during 2017 tell you? Where was money wasted?
- Remember your business plan and the objectives for the enterprise at the beginning of the year, then admit what goals were met, what targets were missed, and why.
A thorough audit of the business should have revealed where cost savings might be made.
Energy supply is one area where SMEs waste huge amounts of money because many never check to see if they are on the best tariff. It is estimated that British SMEs are paying as much as £7 billion more than necessary on energy bills, so check on comparison websites, such as uSwitchforBusiness or Makeitcheaper, for a better contract.
The Government also offers small business owners tips on improving energy efficiency in the workplace, installing energy efficient equipment and turning off unused items out of hours to save money.
If you rent premises, look at the terms of the agreement to see if you might negotiate a better deal with the landlord. Revisiting contracts with suppliers may also bring possible improvements to light.
Finally, look at the company’s bank statements of the last year to see if you are paying any needless bank charges – they can lie hidden, and soon add up.
Watch the competition
2017 highlights from GoCardless
A year is a long time in the life of a fintech startup!
This year, we secured round D funding from our incredible investors, processed more than £4bn worth of transactions for our customers (all 35,000 of them), and the number of people in GoCardless grew by more than 150%.
Our UK and EU growth has continued this year, resulting in a no.11 listing in the Times Tech Track 100 and a mention in the CB Insights Fintech 250. We also ranked 8th in the Deloitte UK Technology Fast 50 and 54th in Deloitte’s EMEA 500, for our 2097% growth rate. You can .
Of course, numbers and awards only tell part of the story, so here are some members of the GoCardless team to share their 2017 highlights.
Seeing our customers thrive
“It has been great to see so many of our customers succeed this year! One great example is UK renewable energy supplier Bulb, which has grown its customer base by 4000% in 18 months. 90% of Bulb's members now pay by Direct Debit through GoCardless, and we've gone from taking 10,000 payments a month for them in January to 100,000 payments in December. We're proud to have supported their growth and ambitions in that time and we're excited to work with them, and all of our fantastic customers, in 2018.”
-- Stevie, Customer Success
Looking to grow your fitness business? Check out our new resources
This month we launched our first ever e-Guide for fitness business owners in partnership with teamup. We spoke to 283 independent fitness business owners to find out how they run their business, what they’re looking to achieve in the next year and what their biggest obstacles are.
Unsurprisingly, business growth was top of mind for our respondents, and they identified marketing and admin as two of the biggest challenges.
Bacs and SEPA processing dates 2018
Planning for next year? The Bacs 2018 Direct Debit processing calendar is now available, so you can easily check the dates when Bacs will process Direct Debit payment submissions in 2018.
GoCardless is one of UK’s fastest growing tech companies in Deloitte Fast 50
We’re thrilled to be recognised as one of the UK’s fastest growing technology companies for the second year running, in Deloitte’s 2017 UK Technology Fast 50.
GoCardless came in 8th place overall, with a growth rate of 2097% over the last four years. We were the third fastest-growing fintech business, after betting exchange business Smarkets and our close friends and GoCardless customer, Receipt Bank.
Meet Merve: GoCardless’ first pre-sales solutions engineer
Before Merve, GoCardless technical specialists sat firmly in the ‘design and build’ corner, making sure we continue to deliver a first class product to customers. But as more and more customers experiment with our API to build their own integrations, we soon realised we needed customer-facing technical specialists who could support the sales and partnerships teams, and help our customers to envisage and plan their own Gocardless integrations. Merve Aygin joined GoCardless in March this year, as our first pre-sales solutions engineer.
What is a solutions engineer?
When a customer is considering signing up to GoCardless, I act as the primary technical lead. My job is to articulate complex technical topics and show them the value of our product by running demos. I also run integration review sessions to help them design and build a best-in-class integration with us.
Recurring payments in numbers
We often get asked by customers: how popular is Direct Debit as a payment method?
Businesses need to take into account customer preferences when deciding on what payment methods to offer. Of course, preferences vary according to your customer base and product or service, but overall, Direct Debit remains a popular choice for regular payments, including monthly invoices, subscriptions, memberships and paying by instalment.
We know that the number of Direct Debit payments made in the UK is increasing, but it hasn't always been easy to see what proportion of regular payments made in the UK are made by Direct Debit.
This year, Payments UK broke down its UK Payment Markets 2017 research into 'spontaneous' (one-off payments, including retail and ecommerce) and 'regular' (recurring payments).
Direct Debit comes out as the UK's preferred method for making regular payments, accounting for 74% of all payments made by volume. The research also shows that regular payments made by credit and debit card dropped 16% in 2016. Take a look at the graphic below for some more interesting stats.
10 tips to keep your membership organisation fighting fit
In this latest guest post from membership sector expert, Richard Gott, we look at how membership organisations are adapting their offerings to meet the needs of members today, and give 10 practical tips to enable change.
If you were able to completely rebuild your membership organisation (and its current systems and processes) from scratch, would it look the same as it does today?
I pitched that question to 10 senior management team members from a range of established membership organisations and associations. All (without hesitation and a few with a knowing look) said no.
Many UK membership organisations and associations were set up decades ago, to meet the very different member needs of yesteryear.