Xero & GoCardless: Putting an end to late payments
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Ben Johnson, Director of Financial Partnerships, Xero Ben leads Xero’s engagement with global financial partners who enable the Xero team to build amazing products that help businesses understand their financial position, manage payments and access working capital.
hy does the issue of late payment exist at all?
Some view it as a question of psychology. Your customers might be busy, forgetful or at worst, selfish. The smarter way is to view it as a question of technology. Then can you solve the problem of late payments at its source - payments themselves. I sat down with Xero’s Director of Global Financial Partnerships, Ben Johnson, to talk about how small businesses should make their payments solutions work better for them, and how Xero’s new integration with GoCardless benefits Xero users. The number one reason small businesses fail Ben doesn’t mince words when it comes to the biggest threat facing small businesses. “The number one reason small businesses fail is poor cash flow. To effectively manage cash flow, it’s critically important that small businesses have an efficient process in place to get paid.” “The number one reason small businesses fail is poor cash flow.” When you don’t have an efficient
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process in place to get paid, the resulting late payment has a knock-on impact on your cash flow. Xero’s Small Business Insights in the UK show small businesses were paid on average 6.6 days late, as at March 2021. When you have staff and suppliers to pay, consistently getting paid this late creates problems. So what’s the solution? You could view it as a problem of psychology and go down the communications route. This can be effective, but it doesn’t address the source of the problem - your customers can only pay late because you’re giving them the option to. At the core of the late payments problem are the methods you use to collect payment. Manual bank transfer - the de facto default way many businesses collect payments - leaves you with zero control of getting paid on time, putting it entirely in the hands of your customers. “Customers who use online invoice payment platforms like GoCardless get paid up to twice as fast as those who don’t.” Addressing the source of late payments requires choosing the right payments platform. Ben explains that Xero’s data
@GoCardless
Rachel Astall, Head of Global SMB Platform Partnerships, GoCardless Rachel works with global platforms that enable SMBs to better manage their business. This includes accountancy software such as Xero, alongside a host of invoicing and membership platforms. By improving the ecosystem of GoCardless’ bank debit solution, Rachel is working to ensure that small businesses can take the pain out of getting paid. Ultimately, so they can spend less time chasing payments and more time doing what they love.
shows customers who use online invoice payment platforms like GoCardless get paid up to twice as fast as those who don’t. “Using the right invoice payment solution can save time, and importantly get money into the business faster. It’s a really foundational part of improving cash flow. It’s also a very practical step that a business owner can take to improve the health of their business.” The payment method that gives you back control Direct Debit is a household name in the UK, Australia and New Zealand, but it’s often pigeonholed as a payment method for things like utility bills, magazine subscriptions, or gym memberships. This is an unfortunately dated view that seems to hang around. Direct Debit and its equivalents around the world, such as ACH debit in the US, are the solution to the source of late payments for businesses of many more kinds. Unlike manual bank transfers, Direct Debit payments don’t rely on your customer choosing to pay you - they are processed automatically.
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