How to reduce failed payments

Picture this: you’re busy building your business, one that’s based on a recurring payment model. Perhaps you're a personal trainer, or a gym, or a food box subscription service. Recurring payments are the lifeblood of your business.

You're hard at work attracting new customers and providing great service. When the job’s done, you send their invoice knowing you’ve got another happy customer on board. So the last thing you need is for recurring payments to fail, leaving you out of pocket and chasing up unpaid bills.

Worse yet, missed recurring payments can put your business cash flow at risk.

Payments can fail for a number of reasons, but chief amongst them are the payment methods you use, and your customers’ willingness and ability to pay. But failed payments are far from an inevitable part of doing business. Understanding how and why they happen means you can create a positive experience for your customers.

In this article we’ll explore how you can reduce payment failure with GoCardless so you can focus on what matters most, growing your business.

What’s a failed payment?

A failed payment is when payment is initiated but the transaction is unsuccessful. For you as the merchant, it’s not always clear whether the payment has been successful or not. Failed payments can happen for a variety of reasons including incorrect payment details being entered, credit card expiry, insufficient funds in the payer’s account, or even a faulty internet connection. Whatever the cause, it's frustrating.

Reduce late payments to help your business thrive

GoCardless is a bank-to-bank payment method that helps businesses collect recurring payments from customers. Research commissioned by GoCardless (2020) found that 2.8% of payments failed globally in 2019, equating to 1 in every 34 payments. This increased to 2.9% in 2020.* An average small business will lose £6,500 every year in uncollected payments; this increases to £23,4000 for medium businesses.**

It's important to reduce late payments early on in your business’ development because it could have a big impact on your future earnings.

Are your payment methods helping or hindering?

Although it’s impossible to completely eradicate failed payments, GoCardless certainly helps in reducing this issue. The research commissioned by GoCardless illustrates that businesses primarily collecting payments with digital wallets have the highest average failure rate (11.5%), followed by credit/debit cards (7.9%) ***. These failure rates are all considerably higher than those of GoCardless merchants.

In addition, a business collecting money primarily using credit cards can expect to experience 2.7x more failures than a GoCardless merchant, while a business using digital wallets will experience 4x more failures***. The different payment methods and their failure rates are illustrated below.

(Failed rates by primary payment methods ***)

The graph shows that GoCardless has 55% lower failure rates than bank transfers and 63% lower failure rates than debit and credit cards.*** Instead of chasing payments, you can let GoCardless do the work for you, so you can focus on what matters most - growing your business.

No matter what your business is, getting paid on time is crucial.

How GoCardless works

GoCardless is a bank-to-bank payment method. It uses Direct Debit to automatically collect recurring payments directly from your customer’s bank account. Which is why GoCardless has lower payment failure rates.

You simply set your customers up to pay via GoCardless in QuickBooks, and then send them an invoice. GoCardless automatically collects payment directly from your customer's bank account on the invoice due date.

To save you even more time, the collected payment is automatically reconciled against your invoice in QuickBooks.

How GoCardless and QuickBooks help solve failed recurring payments

GoCardless helps reduce failed recurring payments because it:

• Puts you in control - customers set up their bank details once, so you can collect ongoing payments without further authorisation. You’re in control of when you get paid.

• Removes the friction from payments - payment is collected directly from your customer’s bank account. So there's no need to worry about your customers entering incorrect details on a bank transfer or their credit card details expiring.

• Notifies so customers can retry - if a failed payment occurs, GoCardless notifies you and your customers. Customers who can retry payments have a failure rate almost one third lower than those that don’t retry failed payments. So the payment is more likely to land in your bank account.

• Reduces admin so you can be more productive - payments are collected automatically and reconciled in QuickBooks. You can spend less time chasing unpaid bills and manually reconciling payments, and focus on what matters most, your business.

How to connect GoCardless to QuickBooks

1. Set up GoCardless Sign in or sign up to QuickBooks. When creating an invoice select the ‘Set up Direct Debit with GoCardless’ option. From here you can create a GoCardless account in a few steps (or connect an existing account if you have one).

2. Connect GoCardless to QuickBooks Authorise your QuickBooks account to connect to your GoCardless account by approving the confirmation email.

3. Set up your customers to pay by GoCardless Getting your customers to authorise you to collect GoCardless payments is easy. From your QuickBooks dashboard send them a link, which they’ll use to enter their bank details. They only have to do this once. Now you can collect ongoing payments without further action.

4. Send invoices and get paid With GoCardless set up for your customer, send them an invoice via QuickBooks as usual. GoCardless schedules payment to be automatically collected on the invoice due date.

That’s it.

For more information go to https://quickbooks.intuit.com/uk/payments/gocardless/

Frequently asked questions

Q: I want to send an invoice for payment. What are the benefits of using QuickBooks with GoCardless?

A: The QuickBooks GoCardless integration is ideal for small and medium businesses that invoice their customers on a recurring basis. This could be a structured payment like a fixed monthly subscription or flexible such as sending variable-value invoices on an ad-hoc basis throughout the year.

It allows you to fully automate the process of invoicing and collecting payments from your customer, so you can focus on what matters - delivering a quality service. Payments are collected via GoCardless and the fees charged are automatically reconciled in QuickBooks, saving you hours of admin.

Q: Will GoCardless transactions be automatically entered into my QuickBooks account?

A: Yes. When a payment is received by GoCardless, it will automatically sync with QuickBooks. GoCardless fees are also imported as an expense into your QuickBooks account.

Q: I already have a QuickBooks and GoCardless account. What do I need to do next?

A: If you already have a GoCardless account, you'll need to connect it to your QuickBooks account. You can then import existing GoCardless Direct Debit mandates into QuickBooks and manage everything from within the QuickBooks dashboard.

Q: What are the fees?

A: With GoCardless' pay-per-transaction fees there are no hidden costs or uncapped rates:

*Information provided by GoCardless in their Payment Success Index 2020 report. In total 52 million payments were analysed: all payments in the first quarter of 2020, which was compared with the first quarter of 2019. This report shares findings from an analysis of payment data from over 55,000 GoCardless customers to create a payment success index.To calculate the percentage of payments that fail, GoCardless looked at the millions of payments running through their payment intelligence systems and calculated the average failure rate across all of those transactions.

** See the GoCardless Payment Success Index 2020 report. In total 52 million payments were analysed: all payments in the first quarter of 2020, which was compared with the first quarter of 2019. Average business sizes and how much they lose as a percentage in failed payments was determined by GoCardless customer data, running through their payment intelligent systems, based on real data.

The total revenue figures used to calculate uncollected revenue may be lower than the revenue brackets for each size of business. This is because, typically, GoCardless is used as part of the overall payment mix. It’s important to look at uncollected revenue across all payment methods. For example, a business with $250 million in annual revenue, with a 2.1% failure rate across all payment methods, will lose $5.25 million each year in uncollected payments.

The currency was exchanged from USD to GBP. The original figure recorded was $8,200. This was exchanged to £6500 (rounded to the nearest 100) using the exchange rate of £0.79 per $1 as of 26 April 2022.

The currency was exchanged from USD to GBP. The original figure recorded was $296,800. This was exchanged to £234,000 (rounded to the nearest 100) using the exchange rate of £0.79 per $1 as of 26 April 2022.

*** See the GoCardless Payment Success Index 2020 report. In total 52 million payments were analysed: all payments in the first quarter of 2020, which was compared with the first quarter of 2019. The failed rates by primary payment methods illustration used an external survey and are therefore self-reported. However GoCardless cross-validated the findings, from different surveys they have run, as being either broadly the same or slightly under-reporting failures, meaning the comparables are either correct or better. GoCardless surveyed 900 people using an audience research platform.

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