How Can My Business Collect Payments via Direct Debit?

If your business isn’t already using Direct Debit services to collect payments, you may be wondering how to get started with the whole process. Now is a good time to offer the opportunity to pay by Direct Debit to customers, as Direct Debits accounted for 10% of all UK payments in 2023. 

Security is also a key aspect of Direct Debit payments. The ONS (Office for National Statistics) reported that the average failure rate for Direct Debits is less than 1%, demonstrating the reliability of the Direct Debit payment process. 

How can my business collect payments via Direct Debit? This question may be on your mind as a business owner. Here, we explain the benefits of this Direct Debit solution for your business and customers. 

Contents

• What is Direct Debit payment collection?
• How can my business collect payments via Direct Debit?
• The benefits of Direct Debit payment collection.

What is Direct Debit payment collection?

A Direct Debit payment occurs when your customer completes an agreement that enables you to collect an agreed amount, which can be either a one-off or a regular transaction, from their bank account. A Direct Debit payment collection can be arranged by following a few simple steps:

Direct Debit mandate form

Your customer signs a Direct Debit mandate form. You can provide them with this agreement to speed up the signing process. This form collects your customer’s information, including bank details, account number, and sort code. 

As official proof of agreement, the mandate form authorises your bank or collecting agency to collect payment on your behalf. It will also include information about the agreed payment amount and date of payment, which will help your business understand how to collect Direct Debits. 

• Bank authorisation

You or your Direct Debit management service provider send the customer mandate form to your bank for checking and approval. The customer’s bank then shares it so that they can authorise the transaction and set up the Direct Debit on the customer’s bank account. 

How can my business collect payments via Direct Debit?

In order to collect payments, the following actions should be taken:

• Your bank notifies the customer ahead of time that the payment is due to be taken from their account on an agreed date. It’s likely that this will be done over email or by post and will inform the customer about the amount that will be debited and when it will leave their account.
• The creditor (the bank taking the payment) will notify Bacs of the upcoming transaction, including the date and amount of payment along with the customer’s bank account details. 

It takes Bacs approximately three working days to process a Direct Debit payment:

Day one: The request is submitted to Bacs.

Day two: Bacs and the relevant banks process this request. 

Day three: Funds leave the customer’s account and arrive in your account. 

Can money still be collected if Direct Debit is cancelled by your customer?

Your customers can cancel Direct Debits at any time. They must contact their bank, and no payments should be made once this cancellation has been approved. Customers are protected with the Direct Debit Guarantee against any errors in Direct Debit collection. 

Any changes to Direct Debit need to be shared with your customers ahead of time so that they have advance notice. Significant changes may require completing a new Direct Debit mandate form. 

The benefits of Direct Debit collection

Asking “how can my business collect payments via Direct Debit” can lead you to an analysis of the advantages of this robust financial system, such as:

• Consistent cash flow

When customers pay by Direct Debit, you have a reliable source of regular income that helps you better manage budgets and future planning. 

With Direct Debit, you also receive Bacs reports, such as ARUDD (Automated Return of Unpaid Direct Debits), which help you adapt when payments change and update plans to suit payment amendments. 

• Efficient costs

Other payment methods, such as credit cards, typically involve higher processing fees than Direct Debit. As a result, collecting payments via Direct Debit is more cost-effective for your organisation. 

• Minimal administration

In contrast to manual processing, the automation of Direct Debits significantly reduces the administrative burden for your team and also eliminates the risk of human error. 

• Improved customer satisfaction

Customers generally like the security of a regular payment that is organised once and then leaves their account on the agreed date without having to worry about it. 

In addition, the Direct Debit Guarantee's reassurance helps customers understand they can trust the process if something goes wrong, as they have a method of recouping any incorrectly taken payments. 

• Enhanced security

As organisations must undergo strict regulation and vetting procedures to accept Direct Debit payments from customers, this payment method is attributed to a strong element of security. 

How Interbacs enhances your Direct Debit management

We successfully manage Direct Debit payment systems for organisations from various industries, from start-ups to large established multinationals. With a compelling industry reputation, Interbacs are ideally positioned to support all of your business account needs and help you enhance revenue streams. 

Ready to make the switch? Contact Interbacs today for a personalised consultation and discover how we can optimise your direct debit processes.