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Late payments: Here’s how you can say goodbye to chasing customers

As a small business owner, you don’t have time to waste chasing up customers on unpaid invoices. This guide offers a solution to overcome late payment and cashflow issues…

Recent research from and GoCardless found that chasing overdue payments is one of the biggest issues facing small business owners today.

Time is a valuable resource for entrepreneurs, and time spent chasing tardy clients/customers for overdue invoices is not a good use of that resource.

What’s more, late payment causes cashflow issues that restrict growth and can lead to failure. Let’s face it, asking for payment is an awkward business that can lead to tense situations and soured business relationships.

So how can you avoid things turning sour?

One of the easiest ways to streamline the process of taking payments is to adopt a method of automatically taking recurring payments – automated payments.

What are automated payments?

Automated payments involve getting approval to take regular amounts from your customer, which is easier for you and them.

Methods of automated payments

Direct debit

Thanks to its simplicity and convenience, direct debit is one of the most popular methods of automated payments in the UK.

Direct debit involves a customer authorising you to take regular payments from their account. Provided you give notice of the amounts and dates, and pending their approval, you can automatically take varying amounts and on different days.

Direct debit provides you with certainty and control, allowing you to be confident in having a healthy cashflow and in your financial project

Direct debit provider

GoCardless is an online direct debit specialist that can help you to set up flexible, recurring payments with customers from around the world. It integrates with a variety of billing and accounting software.

To setup a customer, you simply invite them to sign up online via email or web link and agree a payment day.

GoCardless offers three separate pricing plans:

  • STANDARD – all core features for 1% per transaction to a maximum of £2 and a minimum of 20p, with no monthly fee
  • PLUS – all core features and name on customers’ bank statements for 1% per transaction to a maximum of £2 and a minimum of 20p + £50 per month
  • PRO – all core features for 1% per transaction to a maximum of £2 and a minimum of 20p, with no monthly fee+ £200 per month

Standing order

Similarly, setting up a standing order involves a customer instructing their bank to make regular payments from their bank account at a set amount and frequency.

The central difference between standing orders and direct debit is that only the customer can change the amount or date of the payment.

This puts the power in their hands in the event of a late payment and makes it harder for you to chase and collect when necessary.

Automated card payments

Automated card payments simply require the customer to authorise you taking payments from their debit or credit card.

Although fairly easy to set up, you’ll have to get a merchant account if you want to take card payments and fees are typically quite high at around 20p + 3% per transaction.

The other disadvantage of card payments is that they have quite a high failure rate of around 5%.