Last editedJun 20247 min read
At a glance:
Small and medium-sized enterprises (SMEs) face challenges getting paid on time, with £23 billion in outstanding invoices owed to SMEs by big businesses. To avoid late payments and maintain a healthy cash flow, it's recommended to integrate secure online payment systems like Direct Debit, which as an automated, recurring payment option, reduces the risk of late and failed payments.
Automated invoicing systems can generate and send invoices automatically, ensuring punctuality and removing human error. These systems can also send automated reminders to customers about upcoming and overdue payments, helping to maintain regular communication and prompt payment. Some systems offer early payment incentives or impose late payment penalties, encouraging timely settlements.
GoCardless offers a Direct Debit solution that removes potential payment barriers, speeds up customers’ remittances, and boosts cash flow. The key to eliminating late payment problems is to make it as easy as possible for customers to pay. This can be achieved by setting up simple ways to accept payment, switching to a regular monthly fee, and using an accounting system with online invoicing.
GoCardless offers a simple, cost-effective way to take payments using Direct Debit, making it quick and easy to get started with no contracts or long-term commitment required.
Ever found yourself out of pocket because customers don't pay on time? You're not alone – it’s a problem affecting well over half of Britain’s small businesses. In fact, recent research shows that small and medium-sized enterprises (SMEs) in the UK are owed a staggering £23bn in outstanding invoices by big businesses. How can SMEs end late payments and get paid on time?
Avoiding late payments, the key to maintaining healthy cash flow, entails setting clear payment terms from the start, preferably through a formal contract. This should detail due dates, potential late payment penalties, and accepted payment methods. A crucial aspect in the UK involves integrating secure online payment systems like Direct Debit, which provides an automated, recurring payment option, reducing the risk of missed manual payments.
How to collect Direct Debit payments with GoCardless
1.
Create your free GoCardless account, access your user-friendly payments dashboard & connect your accounting software (if you use one).
2.
Easily set up & schedule Direct Debit payments via payment pages on your website checkout or secure payment links.
3.
From now on you'll get paid on time, every time, as GoCardless automatically collects payment on the scheduled date. Simple.
Leveraging automated invoicing systems can significantly alleviate late payment issues. These systems can automatically generate and send invoices, ensuring punctuality and removing human error. They can also send automated reminders to customers about upcoming and overdue payments, helping to maintain regular communication and prompt payment.
Crucially, some systems offer early payment incentives or impose late payment penalties, encouraging timely settlements. By integrating these automated processes, your business can ensure a consistent cash flow, enhancing overall financial stability.
There are several reasons why your customers may be late with their payments:
They might have ‘mislaid’ the paper invoice or missed you off their payment run
They may have extended their payment terms without consulting you
They might even be in a poor cash flow situation this month and simply don’t have the available cash to pay you.
As a result, bad debts rack up, and cash flow slows down. Startups or small businesses will likely need more money in the bank to get out of these unplanned and unwanted cash flow holes.
That's why GoCardless has developed a Direct Debit solution that removes these potential payment barriers, speeds up customers’ remittances and boosts your cash flow.
Eliminating late payments - case study 1
The co-founders of Perky Blenders, Adam and Victoria Cozens, credit GoCardless for simplifying the payment process, leading to faster cash inflows and fewer administrative burdens. The seamless integration of GoCardless with their Xero accounting software has also added to the efficiency of their operations, providing them with flexibility and confidence in invoicing and payment collection.
"It’s easier for customers to pay, so we get cash into the bank faster... We estimate we’ve saved about £20,000 on admin costs, so GoCardless is a real asset to our business.” - Adam Cozens, Co-Founder.
GoCardless has become essential to Perky Blenders’ customer experience, simplifying payments and creating a sense of trust. Adam highlights that larger businesses expect direct bank payment options, and being able to provide this has positively impacted their relationships with such customers.
"It just cuts down so much time, time on the phone, time chasing emails, time following up. I estimate that I save personally two days a week of work just by using GoCardless.” - Victoria Cozens, Co-Founder, Perky Blenders.
Reduce transaction fees, late and failed payments and tiresome manual admin.
Make it easier to get paid
So what’s the answer to late payment problems? It’s simple - make it as easy as possible for your customers to pay you. Here are a few ways you can do that.
Set up simple ways to accept payment – Using an online payment gateway, or accepting Direct Debit payments, removes a lot of the hassle and admin pain for customers. That means quicker payment for you.
Switch to a regular monthly fee – Monthly retainers or monthly packages spread the cost for the customer and give you a more regular cash pipeline.
Use an accounting system with online invoicing – Email invoices directly to the customer and remove the possibility of a paper invoice getting lost in the post.
How GoCardless revolutionises your payments
At GoCardless, we understand how unpaid invoices can impact your business. That’s why we’ve created a simple, cost-effective way to take payments using Direct Debit.
GoCardless makes it quick and easy to get started, and with no contracts or long-term commitment required, there’s no risk. You can set up instant, one-off, or recurring payments in the merchant dashboard in just a few clicks, and GoCardless automatically creates and sends all the necessary forms, doing all the heavy lifting for you. You can also connect to GoCardless via over 350 partner apps, such as Xero and Quickbooks.
Simple to set up online – Create your account in just minutes, then invite your customers to fill out their bank details securely and easily. You can start collecting payments on the very same day.
Easy authorisation – Customers authorise you to automatically collect payment as soon as it’s due (so no more missing your due date).
Get paid on time, every time – Once a customer Direct Debit is set up, you know exactly how much you’ll be paid and exactly when it will be paid.
Collect payments across Europe - GoCardless accepts payments in pounds with Bacs and euros via SEPA, enabling you to collect payments across the Eurozone.
Collect payments from US customers - GoCardless also accepts payments in US Dollars via ACH payments, enabling you to collect payments from customers based in US territories.
Collect globally without a foreign bank account - GoCardless offers international payments without a foreign currency account. Payments are collected in your customer’s local currency, converted to GBP using the real exchange rate and deposited into your UK account.
Integrated into accounting software - GoCardless is already integrated with the leading accounting software packages, including Sage, Xero and Quickbooks so you can automatically set up payments alongside your invoicing.
Stop wasting time & money - Late payment management is highly time-intensive, involving accounting, calls, and emails for payment follow-ups. GoCardless reclaims this time by eliminating late payments with automated payment collection via Direct Debit, freeing you to concentrate on key business operations.
Eliminating late payments - case study 2
GrowFactor, an award-winning digital chartered accountancy practice, transitioned from card payments to bank payments via GoCardless, substantially improving cash flow and payment efficiency.
"Using GoCardless has saved us £5,000 in time costs and £50,000 in reduced receivables every month. Now, with GoCardless, our invoices are sent out, and payments are automatically collected without the hassle of chasing clients for late payments." - Simon Kallu, Managing Partner.
The firm faced issues with time-consuming manual administration and difficulties collecting late client payments. They also needed help with standing orders that could not be integrated efficiently into their cloud-based accounting workflow.
"GoCardless is fundamental to the way we run our business. Xero and QuickBooks integrations allow us to remain a paperless practice while also providing the security that invoices will be sent and collected. Plus, using GoCardless saves us two days in administration each month!" - Simon Kallu.
Reduce transaction fees, late and failed payments and tiresome manual admin.
Get your cash flow into good health
With GoCardless taking care of your payments, you take a huge amount of the hassle out of managing your outstanding debts.
You no longer need to waste precious time on debtor tracking and chasing customers over the phone. There will always be money in the bank – all year round.
Stop worrying about when that next big payment will arrive. Instead, get back to focusing on managing your business – with healthy cash flow guaranteed.
Eliminating late payments - case study 3
Blu Sky Cloud Accountants were struggling with their subscription payment collection, with chasing late payments and dealing with manual admin and reconciliation taking up far too much time.
Blu Sky switched to GoCardless, and the impact was immediate, thanks to its seamless integration with Xero. Reconciliations are now completely automated, and Blu Sky has a near-real-time picture of its financial position.
“Straightaway, GoCardless saved us a tonne of time and effort. We used to be a week behind in our financial reporting, all the time, and the reconciliation process took two days a month. Now, with GoCardless and Xero, our bank account is reconciled on a day-to-day basis and those two days can be reinvested in our growth. We even recommend it to our own Xero-using customers as part of our credit control product.
Today, 90% of customers pay by GoCardless – but the Blu Sky finance team wishes it was more.
“Finance wants to get everyone on GoCardless, because it's a one-size-fits-all, efficient and reliable system,. GoCardless also gives us greater control. Subscription fees can change month-on-month but it allows us to just go in and quickly make those changes without interfering in the customer relationship.”
There are more than business benefits to working with GoCardless. The additional visibility into payments has allowed Blu Sky to build a more responsive, easier-to-manage credit control cycle. This has spared the team much of the awkward work of chasing up failed payments.
“Our credit control cycle kicks in automatically because we can clearly see when payments are due. Instead of a month-end process, where some payments might be several weeks overdue, it's a real-time chase. As a business owner, I worry all the time, but GoCardless saves me an enormous amount of emotional drain chasing failed payments.”
Reduce transaction fees, late and failed payments and tiresome manual admin.
We can help
Setting up Direct Debit and automated invoices for your clients is effortless and efficient with GoCardless. By automating the payment collection process, GoCardless drastically cuts down late payments and the administrative responsibilities of managing and tracking invoices for your team.
GoCardless makes it quick and easy to get started, and with no contracts or long-term commitment required, there’s no risk. You can set up instant, one-off, or recurring payments in the merchant dashboard in just a few clicks, and GoCardless automatically creates and sends all the necessary forms, doing all the heavy lifting for you. You can also connect to GoCardless via over 350 partner apps, such as Xero and Quickbooks..
Discover how GoCardless can eliminate late payments and automate invoices, making it easier to concentrate on what matters most - your business growth.
Bank payment via GoCardless is more affordable, more secure and more reliable than accepting credit and debit cards.
"Customers don't need to worry about fraud like they do with credit cards and bank accounts don't expire, so they’ll never need to update their details." - Scott Westbrook, Director of Business Systems, Deputy
Frequently Asked Questions — FAQs
What is the best way to eliminate late payments?
The best way to eliminate late payments in the UK is to use Direct Debit, a safe, cost-effective and time-efficient means of collecting payments. It empowers businesses to take control of their payments by automating the collection process, thereby reducing administrative tasks. Moreover, Direct Debit provides predictable payment schedules, enhancing cash flow stability. Thus, leveraging Direct Debit is an optimal strategy to ensure timely payments and improve financial management.
How do late payments affect a business?
Late payments can disrupt a UK business's cash flow, hindering its ability to meet financial obligations such as payroll and rent. This scenario may divert resources from core activities and, in extreme cases, lead to insolvency. Therefore, strategies to ensure prompt payments are essential.
How can you reduce the risk of late payments?
Reducing the risk of late payments in the UK can be achieved through several measures. Implementing a Direct Debit system primarily helps to automate and streamline the payment process, reducing reliance on manual invoicing and increasing the predictability of cash flow. Moreover, establishing clear payment terms, regularly reminding customers of due payments, and promptly following up on overdue invoices can further mitigate risks.
How do you ensure payment from clients?
Ensuring payment from clients in the UK often involves clear communication, strategic planning, and efficient payment systems. Firstly, establish explicit payment terms in the client agreement, detailing when and how payment should be made. Secondly, automate the process using a system like Direct Debit, which provides convenience and predictability.
