Last editedJan 20224 min read
In this article, you will learn:
How traditional methods of rent collection increase the likelihood of late rent payments.
That Direct Debit is now easily accessible to both individual and professional landlords as a method for collecting rent.
How simply switching to Direct Debit gives landlords control over payments and significantly reduces the issue of late rent payment.
"Tenants not paying rent on time!" is always the answer any landlord gives when asked about their biggest fear or number one problem.
Indeed, in the six months from May to December 2021, the National Residential Landlords Association noted that average rental arrears increased by 41%. With high energy prices and the rapidly rising cost of living, this issue of late rent payments will not be solved any time soon.
As a landlord, it's vital to collect your rent payments on time each month. Unfortunately, tenants paying rent late is something many landlords think they have little control over - however that is no longer the case!
Direct Debit and its associated benefits are now available to both individual and professional landlords, and not just reserved for bigger companies.
As a result, landlords can make the easy switch to Direct Debit to reduce late rent payments, save time and stress, and provide tenants with peace of mind.
Does your payment method contribute to late rent payments?
Many landlords leave it to the tenants to decide how to pay, and with cash and cheques becoming increasingly rare, the majority of renters are comfortable with some form of electronic transaction, such as;
However, specific features of these popular rent collection methods contribute to late rent payments and landlords' associated issues.
Reliance on the tenant to take action
Expired and lost cards
Lack of payment visibility
Costs of collecting rent
Time-consuming financial admin
Direct Debit Solves Late Rent Payment Problems
Historically Direct Debit was only accessible via mainstream banks to large businesses who had to pay significant set-up fees, meet high turnover requirements, and other compliance obligations.
However, as banking has opened up to new technology, organisations like GoCardless have provided easy access to Direct Debit and its many benefits for both individual and professional landlords and other SMEs.
Direct Debit is a secure, flexible, recurring, account-to-account, 'pull' payment. This means that the rental payment is pulled automatically from a tenant's bank account.
As far as landlords are concerned, the critical feature is that Direct Debit is a 'pull' payment that eliminates late payments. With Direct Debit, the landlord controls when a payment is made, so there's no reliance on the tenant to take action every month.
Landlords can solve the issue of late payments with Direct Debit and GoCardless! Sign up now
"With GoCardless, previous problem clients are no longer an issue and payments stream in every month. GoCardless cuts down admin time and payment errors, and allows us to successfully collect payments easily and securely with the Direct Debit guarantee."
Guy Hudson, Owner, Norwich Residential Management
|Bank Transfer||Standing Order||Card Payment||Direct Debit via GoCardless|
Advantages of Direct Debit via GoCardless
1) Eliminates late payments
Direct Debit via GoCardless automates rent collection by pulling payments from the tenant’s bank account for the amount and on the due date specified by the landlord. Unlike standing orders and cards, a new mandate does not have to be created if rent goes up, the payment date changes or additional fees need to be charged.
"For ongoing monthly payments it's perfect. You can easily adjust the subscription amounts and don't suffer from the problem of expired cards."
Charles Cridland, Technical Director, YourParkingSpace
2) Notification of cancellation
If a tenant cancels their Direct Debit, you will get an email from GoCardless informing you of this. Knowing the moment payment has been cancelled gives you a head start in contacting the tenant to start your late payment process.
"It takes all the stress away of people not paying and if a customer doesn't have the funds in their account or cancels the payment, GoCardless notifies us so we can deal with it there and then."
Simon Denney Owner, Pure & Clean
3) Save Time on Financial Admin
Using Direct Debit via GoCardless also offers significant time savings on chasing late payments and financial admin. Direct Debit eliminates late rent payments, saving you time previously spent chasing. It also enables you to automate payment collection and other tasks through the GoCardless merchant dashboard.
The dashboard further allows you to easily integrate any accounting software that you may use. By automating payment collection and reconciliation, GoCardless merchants spend 59% less time on financial admin and 90% less time chasing late payments.
4) Low Cost, High Success Rate
Direct Debit is an automated bank account to bank account transfer. Bank accounts cannot expire or be lost, nor does anyone need to remember to make the payment. As a result, Direct Debit solves all the issues that cause late rental payments with cards and manual bank transfers.
Furthermore, the fees associated with Direct Debit are significantly lower than those charged by cards. Collecting that same rental payment of £1000 that would typically cost between £10 - £30 via card payment, would cost only £4 with Direct Debit via GoCardless.
Learn More about our pricing here.
“Not only has GoCardless given us much more freedom when it comes to collections, but it has also saved us money.”
Lee Drayton, Managing Director, LD Fitness
Benefits of Direct Debit for Tenants
Direct Debit is a payment method that solves multiple issues for landlords and significantly increases the likelihood that tenants will pay rent on time.
Not only is Direct Debit the sensible choice for landlords, but it also has advantages for tenants!
Direct Debit is a secure and trusted payment method that offers advantages for your tenants, who receive protection from unauthorised payments through the Direct Debit guarantee scheme. Direct Debit also frees tenants from needing to pay the rent manually - it's a set-and-forget method that benefits everyone.
The standard rental payment collection methods used by landlords - bank transfer, card payments, and standing orders - contain features that make late payments more likely.
In addition to tenants not paying rent on time, landlords face the associated problems of high transaction fees and failed payments, plus high levels of time-consuming financial admin. Direct Debit via GoCardless, by contrast:
Eliminates late payments
Automates rent collection
Offers payment visibility
Controlled by the landlord
Significantly reduces financial admin
Easy to set up