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Why ignoring your payments backend could be costing your business

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Last editedJan 20224 min. read

Are you losing money to your payments process?

For most businesses, the customer is at the forefront of every decision. They’re at the centre of every well-informed strategy, at the heart of every great insight and the driving motivator for success. But sometimes this can lead to backend neglect, in favour of front-end development and can lead to manual-heavy, resource draining processes that impedes business growth.

Ironically, ignoring the backend could lead to disastrous consequences for your customers and the overall business bottom line. Outdated approaches to the backend tend to rely heavily on manual processes, creating major inefficiencies and taking time and energy away from the end-customer. In fact, our recent report on enterprise payments strategies in ANZ found that 77% of decision makers reported having more than 20 full-time employees dedicated to managing payments, which is why it’s fundamental to digitally transform your payments strategy – from every angle.

But what is your payments backend, exactly?

Your payments backend refers to all the systems, workflows and platforms responsible for processing payments for your business. It’s how your company manages payments behind the scenes. Unlike the ‘frontend’, the interface that customers interact with when they initiate a payment-  including the payments user experience (UX), digital checkout flows and available payment methods – your payments backend involves the key processes that aren’t visible to your customers but are just as critically important to the success of your business. 

Neglecting your payments backend could seem at worst, an admin headache, but many businesses don't realise it can also impact your ability to retain customers. While customers may not remember a smooth payment experience, they’ll almost certainly recall a poor one. 

An effective payments backend reduces friction between businesses and customers, and when executed properly can save time, resources and overheads for your company that can better be allocated elsewhere.  Optimising your payments backend can produce various benefits:

1. Reduce administrative burden and associated costs:

Manual processes accentuate challenges for accounts staff, and drive unnecessary administrative costs- and they only stand to increase as you grow. 

In the last 12 months, 46% of decision-makers in ANZ reported higher administrative costs and 70% of these decision-makers cite an increase in administrative costs of more than 10%. 

By increasing the use of automation in backend payments, it reduces the need for costly manual processes. 

For organisations in ANZ, the manual reconciliation process distinguishes itself as a leading recurring payment challenge (62%) followed by high operating costs (45%) and manual invoicing (43%). 

The human cost of managing multiple payment integrations such as performing manual uploads of spreadsheets and manual payment reconciliations, can weigh down a business from mounting costs to losses in productivity. 

Solutions like GoCardless can help to cut costs associated with payments processing by saving on the cost of unnecessary admin burden, large-scale software development and frustrating processing fees. 

Read on for more about reducing operational costs.

2. Use resources more effectively, scale without increasing headcount 

More than three quarters (77%) of ANZ enterprise decision-makers reported having more than 20 full time employees (FTEs) managing payments.  

Diverting staff away from administrative tasks allows them to focus on more mission critical roles, for example enhancing customer experience, building customer relationships and working on new solutions to reduce customer churn and boost satisfaction. 

There’s no need to waste time chasing overdue or failed payments since automation including auto-invoicing, auto-reconciliation, auto reminders and auto-retries if a payment fails, can take care of this function at scale so people can focus on creative and interpersonal tasks instead. 

“The difference between B2B and B2C payments is that B2B payments are a lot more customised. This adds complexity to our typical invoicing process, which introduces a lot of manual effort into what would otherwise be a very simple and automated process.” 

Head of Professional Services, Software Company APAC

3. Get paid faster, reduce failures 

Every year Enterprise businesses stand to lose over $2M in uncollected revenue due to payment failures. By updating your backend you can fix this problem.

Our recent study into business payments strategy uncovered a shocking statistic: half of all businesses are seeing more than 7% of payments fail. Unsurprisingly, the result is leading to bad debt, loss of revenue and, ultimately, poor cash flow. Reducing payment failures with a trusted payments solution can help to optimise business cash flow and while it may seem like an uphill battle, the answer is simple. 

Payment errors, failures and poor processes around managing internal payment methods can lead to customer abandonment. In fact, a recent GoCardless study found that 30% of churn is involuntary - meaning customers unintentionally leave your service and this is often related to payment failure. 

With competition well and truly hot in every sector, it’s important to minimise your risk of payment failures with intelligent, automated solutions that can predict and manage payment failures. Optimising your payments workflow and ensuring that everything works just as intended will ultimately benefit your customer retention rates. 

Delay in payment cycles has become a major issue in ANZ and has been exacerbated due to the pandemic-impacted economy  Over half of ANZ payments decision-makers (55%) reported an increase in time taken to receive payments over the last 12 months. A similar number (52%) reported an average Days Sales Outstanding (DSO) of over 30 days. 

Decision-makers cited navigating banking procedures outside of ANZ as the leading cause of DSO with reducing DSO a high or critical priority for 74% of decision-makers over the next year.

The cost of payment recovery is also of major concern for businesses. Seventy-nine percent of ANZ B2B-only decision-makers reported payment recovery costs of over 10% of their average payment size. By reducing the number of failed payments, businesses can reduce the time it takes to recover these, and the number of people required to execute collections. 

GoCardless can help

Roughly half (47%) of ANZ decision-makers plan to upgrade or implement a recurring payment provider in the next 12 months. Does this include you?

We’ve done the hard work for you, to ensure our best-in-class solutions have considered everything your business needs – on the frontend and backend. 

While finessing your payments backend can seem like a daunting task, partnering with a specialist payments provider, like GoCardless, can make financial transformation a seamless process, and opens up a world of benefits for business growth thanks to reduced operating costs, more successful payments and enhanced customer experiences.

Keen to kickstart your payments transformation journey? Speak to our payments experts at GoCardless to see how our customisable solutions can help breakdown barriers for your business.