How to maintain cash flow across the customer lifecycle

Cash flow is king for big and small businesses alike. 

Whilst critical to small business survival, for larger businesses, it’s equally important for growth and attracting future investment. Cash flow held up in pending or failed payments can stunt expansion and stop businesses from scaling. 

Four out of five businesses indicate that they wait more than a month to receive payments and 50% said that in the past 12 months, 7% of payments have failed.

Now more than ever, businesses need to maximize cash flow to recover from the economic challenges of the pandemic. 

We are going to look at some simple ways that you can optimize payments and cash flow at every stage of the customer lifecycle to help your business grow. 

Stage one: Customer acquisition 

Meeting customer payment preferences

You may not be surprised to know that 88.05% of consumers abandon their shopping cart at the earliest stage - customer acquisition. 

Offering the payment method preferred by your customers means you can reduce the number of drop offs at this crucial stage and, ultimately, increase the cash flowing into your business. 

GoCardless recently partnered with YouGov to understand payment preferences by surveying over 15,000 consumers and 4,990 businesses across North America, UK, France, Germany and Australia.

For consumers in Australia, across all different types of recurring purchases, Direct Debit reigns supreme. Globally the preference also leans towards Direct Debit, with it finishing in the top three choices in every location surveyed.

For B2B recurring payments, 44% prefer Direct Debit compared with 34% who prefer cards.  

Ease of use, automation and widespread adoption are the three main reasons why customers lean towards this option, and offering this solution will mean less and less customers dropping off at acquisition stage. 

Meeting customer currency preferences

Cross-border e-commerce is growing. 

Forrester projects that the international online shopping market will surpass $700 billion in sales by 2023. E-commerce merchants selling directly to international customers will be able to capitalise on this growing trend for buying overseas.  

But to do so effectively, merchants need to keep it simple and meet customer preference on ways to pay. 3 in 4 international shoppers prefer to pay in their local currency, and not just see prices displayed in their currencies to then be met with something different at checkout. 

Choosing a comprehensive and wide-reaching recurring payment solution - like GoCardless - will help meet the needs of a broader range of customers and increase conversions on an international scale. GoCardless facilitates payments in over 30 countries across 8 Direct Debit schemes. 

Zuora found that businesses accepting five or more currencies grow, on average, 50% faster than those that only accept one. 

Stage two: Ensuring recurring payment success

Once the customer is through the door, businesses need to optimize the way they collect recurring payments. However, depending on the method, recurring payments can regularly fail. Failed payments not only mean less cash flowing into the business, but also the time and resource required to try and recover those payments. 

According to research by Forrester, half of businesses surveyed experienced a payment failure rate of 7%. 86% of businesses have more than 20 full-time employees dedicated to recovering failed payments alone. 

Why do payments fail? 

Payments most commonly fail due to:

• Credit and debit card failures

• Lost or stolen cards 

• Card expiration 

• Customer bank payment rejection 

How to stop failed payments

Most payment failure issues can be avoided by using alternative methods. One of the most reliable methods of payment is bank debit. This is mainly due to the fact that the majority of payers have bank accounts, which don’t share the same failure possibilities as cards or other solutions (i.e. loss, theft, expiration). 

This reliability means that customer’s using the more efficient method of bank debit with GoCardless, on average, have a failure rate of just 2.9%. Those using our Success+ solution, which combines machine learning and automation to recover payments, have a failure rate as low as 0.5%. 

Alexander Fitzgerald, Founder & CEO, Cuckoo Broadband 

Stage three: Customer churn & bad debt 

Two things can happen when a payment fails, either it’s a one-off and the payment is recovered, or worse, the payment is not recovered and you lose that customer altogether.  This is what’s known as churn, 30% of which is completely involuntary and is as a result of card loss, expiration or theft. Churn can then result in bad debt for your business. 

According to a report by Forrester, two thirds of B2B businesses with usage or consumption-based models reported that 10% or more of their failed payments result in bad debt. 

Bad debt has an adverse impact on your cash flow. Using a more reliable payment method, such a bank debit, means you can reduce churn and improve overall cash flow into your business. Bank debit users with GoCardless experience a 97% payment success rate. 

Use bank debit to maximize cash flow at every stage of the customer journey

By meeting your customer’s preferences, increasing currency coverage and reducing failed payments and churn, bank debit will maximize cash flowing into your business at every stage of the customer journey.