As an office equipment leasing company, you’re serving your customers successfully by allowing them to lease equipment and furniture that could otherwise be cost prohibitive to purchase outright.
For SMEs, there are many benefits to leasing their office furnishings, as well as IT hardware and industry-specific machinery. These advantages include improved cash flow, as there are no huge upfront purchase costs and payments are spread across a set timeframe.
Leasing also offers the ability for SMEs to scale up quickly and is tax allowable. And contracts often include maintenance and upgrades so a customer can also keep up to date with the latest décor trends and technology enhancements.
However, while you might be helping your customers with their business cash flow, are you managing yours efficiently?
If you’re not yet collecting payments using Bacs Direct Debit, then your business could be suffering from increased financial admin time, unpredictable payments and unnecessary cash processing costs.
Collecting Payments with Direct Debit
You might think that Direct Debits are only for consumers to pay for their mobile phones or utility bills. In fact, last year nearly 10 million Direct Debit transactions were processed for leasing and rental B2B companies in the UK, proving it is a popular and widely-used method for the leasing sector.
There are many benefits to your business of collecting your customers’ regular payments using Direct Debit. Here we detail how you can harness their power for your office equipment leasing company.
Enhanced Cash Flow
Direct Debit, also known as a Bacs payment collection, can dramatically improve your cash flow.
Every customer who pays you by Direct Debit will have their money taken at an agreed time, whether that frequency is weekly, monthly, quarterly or another time period. Knowing precisely when their money will hit your bank account enables you to better forecast, to plan your business spending and balance your books.
Unpredictable payments pose a huge problem for many businesses. If you can’t match your incomings with your outgoings and you don’t have a large contingency fund then you could face a period where you’re unable to pay your staff, suppliers and business overheads.
An unstable cash flow is the reason for up to 90% of small business failure. If this is an area that you’re struggling with, then Direct Debit can help to stabilise your inbound funds.
If you’d like to know more about how Direct Debit improves cash flow, read our in-depth article: The Direct Debit Mandate: A Guide to Securing Your Cash Flow.
Reduced Financial Admin
Collecting payments by credit or debit card, cheques and cash can be time consuming for your financial admin team. The process might include making numerous phone calls to take card payments over the phone, reminding customers via email or letter to pay online or send a cheque, or physically visiting a customer to collect cash.
And if your customer doesn’t make their payment when they’re meant to?
Then this involves even more hours chasing up customers to settle their invoice, waiting to see if the payment comes in, then chasing again when it doesn’t.
All this time adds up, and is admin that can be avoided with a Bacs payment collection. A Direct Debit involves an initial set up with the customer and can then be left to run efficiently in the background.
If you don’t have a Bacs payment collection set up, then you could be wasting money on your payment processing.
Making phone calls to customers to remind them of payments, collect their monies or chase them up when they haven’t paid all adds up to a large phone bill.
Posting out invoices, reminders or letters to demand unpaid fees involves a monetary outlay in stationery as well as postage. And physically collecting cash by visiting a customer will cost you in petrol or travel expenses. All of these small expenses soon add up to large costs.
You’ll also be spending money on staff. Perhaps you employ a full-time financial administrator whose job it is to handle these payments, chase up late payers and to visit the bank to pay in cheques or cash.
By switching to Direct Debit, this member of staff’s time will be freed up to focus on business growth activities, or the role could become part time.
Automated for Ease
Leasing office furniture and equipment is often for the long-term and recurring payments could be monthly, quarterly or even annually. Direct Debit allows you to ‘set it and forget it’ as it’s an automated system that will run indefinitely until terminated.
If your customer has signed a contract and agreed to a set payment every month for the next five years, Direct Debit will take 60 payments on time, every time with minimal involvement on your part. It’s rare for Direct Debits to be returned, so the likelihood is that all payments will be taken with absolutely no hassle.
This could mean that after an initial time investment to get the customer set up to pay by Direct Debit, you won’t need to spend any further time collecting their payments.
In this day and age, all businesses are looking for ways to improve efficiency by automating processes and cutting time-draining procedures.
If the method you currently use to take customer payments involves a heavy amount of manual involvement and repetitive tasks, then it’s highly probable it’s inefficient.
Handling money will always come with a level of risk. However, collecting payments using credit or debit cards, cheque or cash has a much higher risk involved than using Direct Debit.
Taking credit or debit card payments online involves the risk of cybercrime. Cheques can go astray in the post, and cash has a high risk of being stolen or lost.
Direct Debit is run by Bacs, an organisation that is monitored by the government and banking industry and has been operating since 1968. It has processed more than 125 billion transactions since its inception and is trusted by UK banks, building societies, businesses and consumers.
Bacs has strict guides and rules for all those that set up Direct Debit schemes, including businesses and financial institutions. It also has comprehensive business continuity plans and procedures in place to ensure a smooth-running and safe service.
Automated financial payments, including Direct Debits, are protected by the highest levels of data encryption and anti-fraud measures.
By using Direct Debit to collect your customers’ payments you’re covered by these safeguards.
When setting up a Direct Debit with your customer you must first get them to complete a Direct Debit mandate. This is an instruction from the customer to their bank that authorises you to take payments. It can be done over the phone, online or by post.
Each payment must be agreed in advance, however if every payment remains exactly the same and is taken on the same date each month then you’ll only need to send one mandatory advance notice letter at the beginning. This sets out the agreed Direct Debit details between you and your customer.
As the customer has authorised you to collect payments, you have full control as to what date and amount you take – provided you inform your customer in advance of any changes.
A Direct Debit differs from a Standing Order in this respect. A Standing Order, although similar, is controlled wholly by the customer. They set it up and manage it directly with their bank and so can cancel it or change it at any time without your knowledge.
Boosted Customer Satisfaction
A Bacs payment collection is considered the most secure method to take payments. They’re popular with consumers, with 90% of adults having at least one Direct Debit. They’re also trusted by B2B enterprises, with 129 million business collections taken in 2017.
The popularity is due to the convenience of paying by Direct Debit as well as the Direct Debit guarantee. This is a set of measures designed to protect the customer against any money taken fraudulently or in error.
They are entitled to a full and immediate refund if an incorrect amount is debited from their account. This peace of mind for your customers helps to increase their satisfaction with your service and business.
Your customers are no doubt busy people, and they’ll probably thank you for offering a payment option that is effortless and automated. The amount of time they spend in financial admin will be reduced if they switch to paying you by Direct Debit.
Start Collecting Payments by Direct Debit Tomorrow
Many office equipment leasing companies outsource their Direct Debit schemes to third-parties to manage. Bacs has a list of bureaux and facilities management providers that are approved to act on behalf of SMEs and other organisations as ‘indirect submitters’.
Setting up a Direct Debit scheme with a Bacs-approved bureau and accredited facilities management provider such as FastPay is straightforward and cost-effective. It’s also quick to do. We offer a 24-hour set up. Call us today and you could be up and running by tomorrow.