Five reasons to start using direct debit in your business
Getting paid on time is a huge issue for small businesses. In fact, 44% of small businesses in the UK have seen late payments increase during the pandemic. The good news is that you can have more control over when your customers pay you, by using direct debit.
What is direct debit?
Direct debit (known as ACH in the US, or PAD in Canada) is an easy way of automatically collecting payments from your customers’ bank accounts. It’s a direct bank-to-bank transfer, with no cards or manual payments required. We’ve teamed up with GoCardless to offer direct debit payments in Xero.
Simply sign up for a GoCardless account, then share the direct debit authorisation form with your customers via the ‘pay now’ button on their invoice. Once permission is granted, you can invoice your customers in Xero and the payment will be automatically debited on the due date.
Your customer will receive an email from GoCardless before every payment is collected. Once you’ve received the payment, the invoice will be marked as paid and you can easily reconcile it in Xero. The GoCardless fee will also be posted as an expense in your nominated fees account.
Why offer direct debit?
Most invoices generated in cloud accounting software like Xero are recurring. So if you find yourself invoicing the same customers over and over again, it might be time to start thinking about setting up direct debit payments. Here’s why.
Get paid on time
Direct debits are automatic. That means you don’t need to chase customers for payment or worry about how you’ll cover business expenses. Your invoices will be paid on time, every time. As a result, you can have more confidence when planning for the future, or preparing for the unexpected.
Set and forget
Setting up direct debits in Xero is fast and easy. Best of all, you only need to do it once. Customers provide their bank details, authorise you to take payment, and that’s it. This will save you both a significant amount of time.
Safe and secure
Direct debits are extremely safe, because it’s a bank-to-bank transfer. That means payments are secure and there’s less risk of fraudulent activity. It’s one of the reasons why many governments and utility companies use direct debit for bill payments.
Reduce your costs
Direct debit is a bank-to-bank payment, which means you don’t need to cover the costs of using card networks to get paid. The time you spend chasing and managing payments can instead be spent working on your business, making direct debit a more cost-effective option.
Popular with customers
According to GoCardless, when it comes to paying invoices, direct debit is a preferred alternative to manual bank transfers for businesses in the UK and Australia. In the US, direct debit is the preferred way to pay invoices after credit cards.
How to set up direct debits in Xero
We’ve recently released a new GoCardless integration for new customers in Australia, New Zealand, the UK, US and Canada. It seamlessly integrates into Xero, which makes it ideal for anyone interested in setting up a GoCardless account for the first time.
If you’ve already set up direct debits with GoCardless, you can continue using the GoCardless for Xero app for now, and we’ll let you know when we’re ready for you to make the switch.
The post Five reasons to start using direct debit in your business appeared first on Xero Blog.
Source: Xero Blog
