Any business wants to get paid as soon as possible and while issuing invoices promptly is the first step, making paying easy for customers is also essential to good invoice management. There are a variety of popular payment methods available to business owners:
Cheques and cash
Despite increased use of digital payments, some customers still prefer paying with cheques or cash. This approach has the merit of largely avoiding transaction fees. However, payments in hard currency or by cheque involve more admin, are inflexible and can be slow and unpredictable. Late payers can also go unnoticed without automated notifications of overdue invoices.
Customers instruct their bank to pay a company a fixed sum via standing order on a set date, giving the client control to determine how much they pay and when, plus the opportunity to cancel arrangements should they so wish. It’s a cheap or free way for businesses to take payments, but lacks flexibility and can involve a lot of paperwork. It also brings an increased risk of late payments, with no notifications if invoices aren’t settled as expected.
Credit and debit cards
Continuous Payment Authority (CPA) payments – those where customers give permission for companies to take funds from their credit or debit cards – are commonplace and easy to use. The customer supplies their card number online, by phone or in person, which is then linked to their bank account by card networks and settlement banks to take the money owing. It’s a useful way of making one-off transactions or subscribing for regular payments, but can be expensive for merchants as costs are high both per payment and in monthly fees. Failed payments are also reasonably common due to cards being rejected, expiring or getting lost or stolen.
Companies can automate payments, taking money from customers’ bank accounts when payments are due, varying the frequency and amount as required, but without having to seek the permission of the customer each time. Direct Debit carries a low cost per payment for the merchant and failure rates are very low, less than 1% with GoCardless. It’s a very flexible way to take payments, with minimal hassle involved.
Payments by Bacs allow direct transfers from the customer’s bank account to that of the business. While this method is commonly used for regular payments, it can also work for one-off transactions. Bank transfers are popular due to low transaction fees and a low failure rate. Again, they carry the risk companies will not be alerted if payments fail. They are also inflexible, only allowing customers to pay the right amount at a specified time.‹ View table of contents Next page ›