On average, you lose two working days per month chasing late payments.
That’s according to a recent survey of small businesses, which found that business owners spent 10% of their time chasing late payments from customers.
Choosing the right payment service provider makes it easier for your customers to pay and gives you back that valuable time.
In March’s Fintech Friday (see: Are you getting paid?), we looked at how the implementation of some basic credit control functions could help speed up the collection process. In this month’s edition, we explore the why and the how behind choosing the right payment service.
What is a payment service?
Simply put, a payment service is any service provided by a financial institution to allow one person or organisation to pay another for a product or service.
Most of us use payment services every day, whether it is when we ‘checkout and pay’ for our online shopping or tap our contactless cards at the till. For a business wanting to collect from their customers there are many payment services options available, so choosing the right one for your business is key.
5 advantages of choosing the right payment service
- Get paid faster
According to Xero, customers pay 35% faster when a business connects to a payment service.
- Increase sales
How many of you have tried ordering online and given up at the checkout stage because the process is too time consuming or difficult? According to Stripe, 87% of customers abandon a purchase if the checkout process is too difficult or too timely. For those trying to increase their online sales, the right payment service will make or break a transaction.
- Improve customer relations
It can be awkward having conversations with customers about collecting debt. By attaching a payment service to your invoices, it removes the need to have those difficult conversations and paves the way to better customer relations.
- Save time
Benefit from the time saved not having to chase your customers. If you select a payment service that connects to your accounts software, you can save even more time on reconciliation.
- Log a digital audit trail
If a payment service is attached to an invoice sent from Xero, the software will record when an invoice was sent, when the customer viewed it and when the payment was made.
How to choose a payment service
When choosing a payment service, you need to consider how you ‘invite’ your customers to pay. Is it via your online website, in-person at a till in your café or do you send your customers an invoice?
There are payment services to suit all requirements and while people expect there to be a solution for selling in-person or online, many people are surprised to find out that even when invoices are sent to customers, a payment service can be attached to assist collection of debt.
To give you a snapshot of what’s currently on the market, below is a broad summary of four of the most popular payment services available:
With links to Sage, Xero and Quickbooks, Gocardless is the perfect solution for those businesses that either deal with subscription payments or invoice payments.
For subscription payments, you can create a payment plan with your customers. It is a one-time set up which takes your customers two minutes to complete. Once set up their plans can be easily amended.
Gocardless is ideal for both regular and ad hoc invoices. Once a customer is set up, you can schedule payments or allow Gocardless to pull payments based on invoice due dates. If linked to your accounting software, reconciliations will be done automatically.
Stripe is perfect for any business that requires or would like to accept online card payments. It makes it convenient for customers to pay by card. Invoices sent from your online accounting software can be emailed to customers with a ‘Pay now’ button attached. The customer then simply clicks the link and enters their card details.
Stripe can also offer a payment solution for your ecommerce business or point of sale receipts.
Popular in the retail and hospitality industry, iZettle offers a point of sale solution that is easy to set up and enables customers to pay via ‘chip and pin’ or ‘contactless’. It integrates well with both Xero and Quickbooks, making bank reconciliations easy and straightforward.
iZettle also offers a food and drink app which has other industry specific features such as split bills, stock management and staff and waste tracking.
With its unique square shaped reader, not only does Square offer a point of sale solution, it also allows you to take customer payments over the phone. Square can be added to existing websites to facilitate payments online.
For those businesses that use Xero, Square can be connected so that sales information is fed directly into the account’s software. When connected to Square, Xero automatically creates bank rules, so that reconciliation can be done quickly.
The market for payment services is competitive. Most offer tiered pricing which is a combination of a monthly transaction fee and a set percentage per transaction.
When pricing up a payment service and seeing if it is of value to your business, you need to offset costs involved against admin time spent collecting debt, and the cost involved in customers holding onto your money. It is a known fact that businesses that have problems recovering aged debt often have cashflow problems that can lead to them resorting to expensive, short term finance.
How can we help?
Questions about features, set-up, fees? Speak to our digital advisory team if you are considering setting up a payment service. We are well versed in helping clients to select the right service to meet their business needs and, in some instances, we might also be able to get you a better deal on your monthly subscription.
Email us or call on 0161 905 1616 to see how we can help get you set-up with the right payment service.