· What is Direct Debit?
· How SMEs can use Direct Debits?
· How to set up a Direct Debit for your customers
· The benefits of DDs for SMEs
· The downsides of Direct Debits
· Direct Debit services for small businesse
Direct Debits are a cheap and efficient way for businesses to take payments from their customers.
The customer accepts or signs and agreement (called a Direct Debit Mandate) that allows the business to take payments directly from the customer’s bank account.
Running through the BACS network, a Direct Debit is operated by the business using either a Bacs bureau, a specialist secure service such as Access PaySuite, or by licensing Bacs software to run with an in-house team.
Using a Bacs bureau, when a business wants to collect recurring payments, the business does this from within the PaySuite system and the Bacs network does the rest.
Because the whole process is automated, the banks make a very small charge for using the system which makes them very cost-effective for even the smallest business or charity.
And using capable solutions such as PaySuite means that they can be linked up to financial and operational systems via API making the whole process from start to finish totally automated which can save tons of time.
Direct Debits (DDs) have the benefit of being very flexible and contrary to popular opinion they don’t have to be for a fixed amount or on a fixed date.
This means that the use of DDs is limited only by your imagination and we know that some of our customers have developed very creative ways to make their customers lives much easier.
The most obvious use of a DD is for a regular subscription payment. This fires every month at the same time and is for the same amount of money but the good thing about using a Direct Debit is that when you revise the costs of your subscription you can alter the payment amount without setting up a new Direct Debit Mandate.
Alternatively, you can use them for variable amounts on a fixed date. A good example of this would be a phone company that doesn’t know what the usage is going to be from one month to the next. They could hook up PaySuite to their operational systems and then automatically collect the right amount of money at the next agreed payment date.
Some businesses may not know when they need to collect money from their customers. For example suppliers to trades will run an account up to a certain amount and then the customer will need to make a payment to bring the account back within terms before they can order any more goods.
Again, the company can integrate PaySuite with their accounting package and when the customer’s account reaches a pre-set limit, the Direct Debit is activated.
So you can see that a Direct Debit can be used even where you don’t know in advance when the payment will need to be made or how much you will need to collect.
So how does a company set up a Direct Debit in practice?
A Direct Debit allows an organisation to make a call on the bank account of their customers. As you can imagine this could be a recipe for disaster if there weren’t strict rules in place.
There are a few ways to do this. Using a Direct Debit provider, this takes all the headache of sending files to Bacs to process and then monitoring the paids and unpaids.
For your customers, many business use an online Direct Debit form which they then link to their website. Prospects complete the secure form that set up the instruction directly within the software.
This is also the most efficient way to work because there’s no infrastructure needed on your side – and the customer completes the form.
Alternatively, you can set up Direct Debits via phone, whereby your staff receive calls from customers and take the information over the phone, entering it directly into the system themselves.
This has the benefit that it can be used for people who don’t have access to the web or where they need help.
The third way is to get people to fill in a paper Direct Debit Mandate (DDM) which they return to you and you enter the information into your solution. This is not the most efficient way to do this and you are much better off developing a web-based method.
Direct Debits have become very popular in the business and charity community and with good reason. Read our post to learn about the advantages of Direct Debit for your business.
Taking payments by Direct Debit is cheap, quick and efficient and it helps with your cashflow forecasting.
You’ll find that your customers appreciate the convenience too and it will certainly reduce your bad debt rate.
PaySuite provides a small business Direct Debit set-up solution that is quick and easy to use and provides super reporting and excellent integration with other software services.