App of the Month - GoCardless

This month we focus again on cash flow and a great app that offers businesses a low cost and flexible way to collect customer payments via Direct Debit. GoCardless is the UK’s leading Direct Debit provider used by over 50,000 users. It works for businesses of all sizes but is particularly useful for small businesses that may have difficulty getting Direct Debits set up with their business bank account, either because of size, cost or the variability of payment amounts.

Direct Debit is an ideal solution for businesses with:

• Subscriptions i.e. memberships, software or support contracts
• Regular invoices for either fixed or variable amounts
• Payments collected via instalments to spread costs for customers
• Rent invoices

No late payments or time spent chasing debts

With Xero’s data showing 52% of invoices are paid late it is clear to see the benefit of Direct Debit in setting agreed collection dates, providing certainty over cash flow and reducing the admin time required in chasing late payments.

Reduces hassle

There are a number of reasons why customers pay late but some invoices just simply get overlooked. Once set up the whole process can be automated and GoCardless will continue to collect payments without you or the customer having to do anything.

Cost-effectiveness

GoCardless is free to set up with charges of 1% + 20 pence per transaction up to a maximum of £4 for domestic transactions. Contrast this with card payments that can incur charges of 3-5% per transaction and the interest costs incurred running a typical bank overdraft while awaiting customer payments.

Reliability

Roughly 3-5% of card payments fail each month due to card expiry or cancellation. Direct Debit is far more reliable as it relies on customer bank account details. Direct Debit failure rates are less than 1%.

One-off payments

They have also recently launched an open banking solution for collecting one off payments that is easier and has more visibility than card payment or bank transfers. https://gocardless.com/solutions/instant-bank-pay/