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Clients can’t Budget

16th Feb 2021
Brought to you by
Ordo
Ordo removes hassle & headache from payments, making getting paid easy. Ordo means reduced...
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Ordo – the real time payment system that helps your clients budget and your business get paid 

Budgeting is not second nature to all your clients. Now, more than ever, people are turning to budgeting apps to help them reign in spending and save money for the necessities, but some surprising research has shown that these apps might have the opposite effect. Instead of helping people save money, they sometimes encourage people to spend money. What can businesses do to make sure their payments are properly budgeted for by their clients? Using a real time payment system like Ordo ensures businesses get paid on time and helps clients know exactly how much they have in their accounts. Ordo is the official payments Open Banking partner with Sage and is available in the Sage marketplace, along with also being fully integrated with Xero and Quickbooks too.

Reasons for budgeting difficulties

Sticking to a budget has been something many people aspire to, but there are various reasons it is more difficult for some. Everyone has a different relationship with money. Whilst some people enjoy the process of saving money, others are more comfortable spending it. These money personality types spring not only from genetics, but also from the past financial situations experienced by a person or their family. People classified as spenders often focus more on what their money can do for them in the present and this mindset can get them into difficulties when it comes to budgeting.

In addition to an individual’s money personality, external factors also contribute to budgeting problems. The pandemic has made budgeting a necessity for many. According to a survey commissioned by the Bank of England over one quarter of respondents saw their household income fall in 2020 and among the self-employed this percentage rose to 66%. Furthermore, a fifth of survey respondents say the pandemic has created financial difficulties for them. 

People are turning to budgeting apps

In light of the above statistics, it is no wonder that people are turning to budgeting apps to help them spend and save their money wisely. Many of these apps collect and present information from all of a user’s financial accounts making it easy for the user to see how much they have. Payments can be categorised, direct debits can be tracked, and spending limits can be set. These apps are growing in popularity. 

Budgeting apps can increase spending

If budgeting apps are supposed to help a consumer save, why do they sometimes encourage spending? Research by Think Forward Initiative and Eller College of Management, University of Arizona suggests that the answer lies in how financial data is presented in these apps. Many traditional budgeting apps will show the user exactly how much money they have left in their accounts. By seeing the money available, the user may unconsciously feel they have licence to spend it. This urge to spend is more pronounced at the end of the budgeting period. To combat overspending among budgeting app users, the study provided several suggestions for improving the apps.

Give a range available for spending – Instead of providing users with the exact amount they have spent, provide them with a range. Uncertainty in the amount left in their account, stopped people from spending as much.

Reduce the budget window – Users spend less if they focus on smaller budget periods.

Allow flexibility in budgeting – If users are permitted to reset their budget during the budget period or add in additional spending money they might be less likely to overspend at the end of the period.

Until these changes are implemented in apps, how can a business make sure they are properly budgeted for by clients? Make it easy for them to pay whilst they are checking their budget on their smartphone and use a method that means the money is transferred from their account immediately so they know what they have left in their account is actually what they have left. 

Ordo is the perfect real time payment system for businesses and consumers alike. When your business requests a payment using Ordo, clients do not have to download an app or reveal sensitive bank details - they simply click a secure link on their mobile or internet-connected device in order to make their payment. The money leaves their account instantly, meaning they know how much they have available in their account and your business does not need to wait for payments to clear. Find out more about how Ordo can help your business and your clients by arranging a demonstration today.