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GoCardless helps businesses accept Direct Debit payments.

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The solution to late payments

4th Aug 2017
Brought to you by
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GoCardless helps businesses accept Direct Debit payments.

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Have you found this content useful? Use the button above to save it to your profile.

Direct Debit helps businesses save time and money by avoiding the payment chasing process.

Small businesses in the UK face bills of over £2 billion, just to chase up customers who don’t pay on time. What’s more, small businesses across the country are suffering under the weight of £14.2 billion in combined unpaid invoices.

The effect of late payments on SMEs

SMEs need to chase late payments, which causes them to spend a great deal of time and money in the process. It is usual for SMEs to spend a few hours a week chasing late payers and some SMEs even employ someone specifically to pursue outstanding invoices.

However, many SMEs are affected by late payments in some way, as recent research from Bacs shows:

  • 19% of these SMEs admit that being owed between £20,000 and £50,000 could drive them into bankruptcy
  •  7% say they’re already facing the danger zone
  • 16% struggle to pay their staff on time
  • 28% of company directors have had to reduce their own salaries to keep essential working capital within their business
  • 32% say that overdue invoices compel them to delay paying their own suppliers
  • 25% rely on bank overdrafts to make essential payments
  • 15% have trouble paying essential business bills, such as utilities and rent

Late payments don’t just block cash flow for small businesses; but also jeopardise the long-term security and capital businesses need to grow and evolve. Customers pay late for reasons ranging from pure forgetfulness to their own cash flow issues, and everything in between. But no matter why, the end result is the same: businesses don’t get paid on time, which in many cases causes them to struggle to pay their own suppliers, perpetuating the late payment culture.

Automated systems

Putting in place automated systems makes the payment process easy for customers, which can help businesses control their cash flow more effectively by solving the late payments problem. By encouraging customers to set up automatic payments by Direct Debit, businesses can ensure no more missed payments.

GoCardless uses technology to level the playing field, offering businesses of all sizes the benefits of Direct Debit, the UK’s most reliable payment system.

“Falling late payment totals is welcome news for small to medium size businesses and for the wider economy. It’s good to hear that relatively simple measures like collecting money by Direct Debit are helping to keep SMEs out of the late payments trap,” Mike Hutchinson of Bacs told Business Matters magazine.

Barbara Gaunt of FD Works, a Bristol-based accountancy firm has seen an increase on efficiency by using GoCardless: “The biggest benefit of GoCardless has been time saved chasing up customers who’ve not paid. I was spending several hours a week on the phone, or sending out polite chaser emails to clients. That time tends to stop you being efficient.”

Would you like to know more about how GoCardless can help you save time and money, boost cashflow and prevent late payments? Get in touch.

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