Ludovic Frank - Freelance developer

Corporate cash flow can be smoother and more predictable, and here's how technology can help.

ionicons-v5-k Ludovic Frank Oct 20, 2022
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Hello ?.

Well, yes, we're back together this week for an article that's more "entrepreneurial" than "tech", but don't worry, tech isn't far off.
If you're an entrepreneur, you might learn a few things, and if you're not, well ... you might too!

Foreword: In this article I'm going to talk about products and services, there's no commercial connection with the products I'm talking about, I'm only doing it because I find it interesting and because it may solve problems for some of you.

What not to do

First, let's talk about what NOT to do.

It's no substitute for trust

If you're working with people who don't pay you what they're supposed to, there's no point in using this article to help you. If you're working with people who don't pay you what they're supposed to, there's no point in using this article to "protect" yourself from them. In fact, reasoning like that is more likely to damage rather than strengthen the relationship you have with your customers...

Play by their rules

If a company decides to pay you on 30 days' notice, it's for a reason, and that reason is very simple: just like you, they need to manage their cash flow well, letting money in before they can let some of it out again. Disaster!

Of course, you may not agree with 3-month payments, for example, which is why things have to be clear when you draw up the quotation/contract that governs the relationship between the two parties in this business relationship.

Tell the truth, right away...

There's nothing worse than unpleasant surprises. It happened to me as a "customer", when a service provider, whose details I won't go into, had access to and took the liberty of putting a SEPA direct debit mandate on my company's bank account. Honestly, the feeling when this happens is very unpleasant. That day, trust was broken...

As a result, make the terms of payment clear on your quotations and contracts, and in addition to the signature, make it clear what's going to happen. And if he says no, it's no.

SEPA direct debits

Here we are, now that the warnings are out of the way, let's take a look at how it works and the different providers available if you're not a CAC 40 company.

SEPA direct debits are a payment method that, unlike credit transfers, works on a "pull" basis.You're bound to have dealt with it before, for example, when paying your cell phone or Internet bill.

It's particularly well suited to small amounts (under 5,000 euros, or even more for other providers, but I don't recommend it).

The law normally stipulates that the customer must be clearly notified of any direct debit before it takes place. I'm sure you'll agree that not everyone respects this rule, but you do, don't you?

How does it work in practice?

(For the more professional among you, we're not talking about SEPA B2B here)

Your customer has to sign a SEPA direct debit mandate. This doesn't have to be a paper document - you can present digital mandates.In some cases, certain customers will give you their RIB and ask you to do it for them, so it's up to you to decide whether the relationship with the customer allows you to do this or not.

Once the mandate has been validated, your customer will appear in your interface, and you'll be able to request payment of a given amount (one-off or recurring) and the date on which you want the money to be debited from the customer's bank account.

On your side, you'll see on a clear interface when such and such an invoice will be paid, and normally, so will your customer... It all depends on the service provider.

Providers who can do this

GoCardless

This is the one I use personally, the fees are correct, 1% + 0.20 cts per direct debit, Gocardless is a company that "only" does this, so there's no additional billing system.

They're very good at recurring payments (e.g. hosting fees, domain to be collected monthly or annually).

But it also works very simply, they have integrations with existing accounting software, like, the best known, sage, but basically, their interfaces already get the job done.

What I really like about GoCardless is that they play by the rules, notifying the customer by e-mail before the debit is made

(and as far as I know, you don't have the option of preventing this, which is fine).

I also like the fact that you won't be charged any additional fees if the customer's bank rejects the direct debit, which is not the case with the other provider.

Stripe

Stripe is well known in the Internet world, they're one of the top "payment gateways", very well known, in particular for their card payment systems, and they've recently started offering SEPA direct debits.

Stripe, I'm less of a fan, because for the less "geeky" among you, you need a minimum of code to access the SEPA direct debit system (create a pre-form that redirects you to Stripe to register).

Finally, in the interface, it is implied that you must issue the invoice with their systems to initiate the SEPA direct debit, the issue of the invoice, is not free, basically the SEPA direct debit, costs less than GoCardless, but, with this is not always true.

Also, if the SEPA direct debit misses, Stripe will charge you (7.50 euros at the time of writing), which seems to be rather dangerous, and can quickly drive up the bill.

I love Stripe, but not for SEPA direct debits, so it's worth talking about.

Conclusion

SEPA Direct Debit is a tool, and like all tools, whether it's good or bad depends on how you use it.

It enables you to plan ahead, avoid unpleasant surprises and therefore maintain peace of mind. When things are clearly established for the parties involved, it means less work for the customer's collaborators, and more time for other things.

Have a great week?