The ultimate guide to payment metrics

What makes the perfect payment strategy? Is it getting the most value for your money? Is it offering the best customer experience? Is getting paid fast? Or is it a combination of all of these and more?

It’s these kinds of questions we’ve pondered at GoCardless for years. With our 85,000-strong customer base, we’ve helped businesses with their entire recurring payment operations. Through our experience, we’ve identified key payment metrics that every business should be tracking to make their payments work for them.

In this guide, we’re going to outline the core payment metrics we think are key to an efficient process and how you can quantify and monitor them. Whether you work with GoCardless or not, this guide should help you to properly assess your payment processes.

Why should I look at these metrics?

1. Find, optimise and measure hidden inefficiencies and untapped growth levers in your payment strategy.

2. Compare the inherent strengths and weaknesses of different payment methods and payment providers to decide which are best for your business.

What are the key metrics you should be looking at?

1. How long it takes you to get paid - whether you’re using a slow payment method or wasting time chasing customers, the speed that cash flows into your business is crucial to success

2. Payment failure - many businesses don’t have a handle on when or why a payment fails

3. Customer experience and churn - it’s a challenge to attract new customers, you don’t want to lose them just because you’re using the wrong payment strategy

4. The total cost of ownership - this is an obvious one but many businesses often only look at fees when understanding cost. The real picture of cost is much larger

How long does it take for you to get paid?

Cash flow is the measure of how long it takes to settle a payment when it has become a receivable. Cash flow is usually measured in Days Sales Outstanding (DSO), where you calculate the full period of time it takes to get paid.

Why is it important?

Cash flow has a huge impact on businesses of all sizes as it impacts the money you have available to reinvest in the business and to pay suppliers. When you’re waiting to get paid for work you’ve already done or goods you’ve already sent out, it could cause bad debt and negative cash flow.

Calculate your cash flow

Metric: number of days to actually get cash in the bank after payout

A report from Forrester found that 52% of Aussie businesses wait up to 30 days to receive payments after the arranged due date.

Calculate your DSO

DSO = Accounts Receivable at the end of the period/Gross revenue over the period X Number of days in the period

Once you have your DSO calculated, use our calculator below to calculate how much revenue you have held up and how you are waiting to get paid.

How many of your payments fail?

Payment failure is a measure of the number of payments you attempt to collect but then fail. They can fail for a number of reasons, with cards expiring or getting lost being among the key reasons cards fail. It’s usually measured as a percentage of the overall number of payments you collect.

Why is it important?

Payment failure means you have revenue held up in unsuccessful payments, you’re spending time chasing customers and you can even lose customers if payment goes uncollected. Forester found that 11-15% of customer churn is due to payment failure. In a world where it’s harder than ever to attract and retain customers, you don’t want something like payment failure to disrupt that relationship.

Calculate your payment failure

Metric: percentage of payments fail over a period

The payment method you choose matters. To understand the impact of payment methods on failure rates, we surveyed over 50,000 GoCardless customers who use multiple payment methods to see how they compare.

We found that some payment methods have significantly higher failure rates than others.

Payment method - Failure rate

• Digital wallet - 11.5%

• Credit or debit cards - 7.9%

• Bank transfer - 6.5%

• GoCardless - 2.7%

How much revenue are you losing to payment-related churn?

It’s easy to think that the quality of goods and services you provide is the main influencing factor when attracting and retaining customers - but that isn’t the case. Your payment journey can have a huge impact on how many customers you lose or keep but it often gets overlooked when addressing customer churn and experience.

Why is it important?

It’s great to get new customers but you also need to retain the customers you’ve already worked hard to attract. Without a successful retention rate, your business can only grow so much.

Calculate your churn

Metric: Number of customers that churned/ Total number of customers x 100

Churn can come in two forms. Voluntary churn is where a customer decides they no longer want to use your service. Involuntary churn is where a customer is lost even though they may still want to access your services.

30% of all churn is related to failed payments so the more the payments that fail, the more customers you may end up losing who actually want to stay with you.

The payment method you choose has a direct impact on the customers you lose as a result of payment failure. In our research done alongside the Subscribed Institute at Zuora found that there's a stark difference between payments and the subsequent churn.

Payment method - churn rate

• Digital wallets - 16%

• Credit or debit cards - 14%

• GoCardless - 4%

Cards and digital wallets have the highest customer and revenue churn rates. This not surprising when they also experience the highest payment failure rates. 

Use our calculator to calculate churn and see how much churn is related to payment failure. 

How much does it all cost?

Of course, cost is important, we don’t need to tell you that. What you may not realise is that the cost of collecting payments goes far beyond the upfront fees or international transactions. All of the metrics we’ve discussed above have an overall impact on the cost of collecting payments.

We can break these costs down into two types, direct and indirect. Direct costs are the ones we mentioned before such as fees and foreign exchange costs. Indirect costs are all the costs attributed to the management of payments and when things go wrong.

You can use the calculators listed in this guide to help you calculate the indirect costs of collecting payments. By looking at these costs holistically, you can get a better view of whether your payment process is working for you or whether it’s a drain on your money and resources.

There’s a lot more to payments than first meets the eye. That’s something we’ve learned throughout 13 years of experience in payments. Often businesses collect payments in the same way they always have without looking at some of the more widespread issues payment can cause.

Hopefully this guide will help you to understand the full reach of payments within your business. If you’re looking to upgrade your payments strategy, use our guide to help you have a better understanding of what to look for and better conversations with payments experts.

Use the guide