Taking payment by direct debit has many benefits for accountants, including being able to pull regular monthly payments from clients with a quick and easy setup.
Direct debit’s use by accountants has grown alongside the rise of the fixed price compliance retainer. Typically these arrangements cover firms delivering a suite of compliance services, covering bookkeeping, VAT returns and annual filings.
This gives accountants reasonable certainty around fee collection, which makes their internal forecasting easier and allows clients to smooth out the payment of their services evenly throughout the year.
However, direct debit can sometimes fail. This can occur for many reasons, including businesses not having enough funds in place, maximum transaction limits being exceeded, or card details not being up to date due to them having expired, been lost, or stolen.
These issues can be overcome by using Chaser's automated follow ups alongside direct debit. This creates a powerful combination that enables accountants to leverage the efficiencies of direct debit while also having a backup process in place for when it fails.
Benefits of direct debit
Direct debit is one of the best ways for accountants to get paid.
It helps overcome the issue of late payments by making it easy to collect funds once clients authorise its use. Payments are then automatically collected without clients needing to approve and consent each time.
Accountants also save significant time due to rarely needing to chase for overdue invoices. These time-saving efficiencies can be combined with SAAS metrics such as customer acquisition costs and lifetime value that enable accounts to build scalable practices.
Direct debit is also cost-effective. Whereas card networks cost around 3%-5%, direct debit providers typically charge customers between 20p-£2 per transaction.
Direct debit can sometimes fail
While direct debit is almost perfect, there are instances where it can fail.
Certain providers require payers to sign up by giving their bank card details. This can result in failed collections if cards expire or are reported as being lost or stolen.
Additionally, more businesses are moving their payments to prepaid expense management cards to give them control over how they spend. Prepaid cards can only transact the value of the funds they hold, companies often forget to top them up, and employees commonly apply spending rules to not pay for services above a specific limit.
In all of these scenarios, payments fail, resulting in late payments and the risk of not being paid at all. As well as putting strain on cash flow, this can be detrimental to relationships due to accountants needing to communicate with clients to get their direct debit bank mandates updated. This also can result in accountants losing focus due to not having the bandwidth to deliver value-added advisory services.
Given that direct debit payments are successful most of the time, it’s easy for accountants to forget to check whether invoices have been paid, so it’s essential to have a backup option to ensure payments don’t slip through the net.
How Chaser can collect failed direct debit payments
Chaser is an essential tool for accountants to have in their armory for when direct debit fails.
The platform can be set up with a rule for personalised chaser emails to be sent out to clients when their invoices become overdue. These can be followed up with further emails or SMS text messages. This gives accountants peace of mind that they have an automated process in place for the instances when direct debit isn’t able to collect payments.
Chaser provides an end-to-end receivables automation process, including a payments portal, credit checks, outsourced credit control, and debt collection services for cases that require escalating.
It is also suitable for legacy clients or those of an older demographic who may be less comfortable with signing up to direct debit. It’s hard to operate a one-size-fits-all payment solution, but accountants who incorporate Chaser into their accounts payable function can be confident that unpaid invoices will be followed up, with the payments portal giving clients a range of payment options to settle their outstanding payments instantly.
How Chaser creates efficiencies for firms and enhances client relationships
Chaser creates efficiencies for recovering late payments related to both failed direct debit transactions and clients who rely on legacy invoicing methods with 30-day payment terms.
Minimal time is required by accountants to follow up on late payments due to Chaser providing a fully automated system.
Additionally, the personalised and polite nature of system-generated emails and SMS messages maintains client relationships by avoiding the risk of sending out non-personalised communications that may upset clients and stand a greater chance of getting ignored.
Time saved from chasing for late payments can instead be used to provide a better client service by focusing on advisory, optimising compliance workflows or by engaging in conversations with clients who have high strategic value.
Conclusion
Incorporating payments by direct debit and using Chaser for automated follow ups is the most fail-safe option to reduce the risk of late payment while also providing clients with a compelling user experience.
By offering direct debit payment options within their Chaser payment portal, accountants and bookkeepers can get more predictable payments from their clients. When and if those payments fail, they can rest assured that no payment will slip through the cracks. Following missed payments clients will receive automated, personalised reminders via email and SMS to make payment or update their banking details.
Learn more about how your firm can get predictable payments with direct debit and Chaser.
