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SME's guide to recurring payments
Read our brief guide on recurring payments. This guide has been designed to help you understand Direct Debits and how a recurring payment system would work within your SME.
When enterprises need to explore their options in setting up recurring payments, Direct Debit facilities are often the best choice. Utilising the Direct Debit system allows businesses to automate recurring payments, reducing admin hours that can be used elsewhere.
What is a Direct Debit?
When a customer agrees to a Direct Debit, they authorise a company to collect an agreed amount from their bank account at specified intervals, such as weekly, monthly or yearly. This relationship from client to customer is agreed by signing a Direct Debit mandate.
Unlike a Standing Order, Direct Debits are far more flexible because the frequency and amount can be changed when necessary. Most mobile phone contracts are liable to change month to month, depending on usage, meaning the mobile phone provider can consistently claim the money owed.
To offer customers a Direct Debit payment option, the business must go through a strict vetting process.
What are the benefits of using a Direct Debit recurring payment system?
If used correctly, the Direct Debit recurring payment system can ensure a business has a steady cash flow from its customers. Through creating a policy of regular payments, customers will remain loyal to a business due to their reliability. That is if they ensure their service is given after they have paid, of course.
The Direct Debit guarantee also gives a layer of insurance to the customer, knowing that they are protected helps in initially drawing in and creating a customer base. The Direct Debit Guarantee is in place for the rare occurrence that there is an error in the collection of the payment, for instance if the frequency or amount is incorrect.
The customer can cancel a Direct Debit at any time, through the business or their banks, allowing them total control of their policy. Furthermore, if there is to be a change of the amount collected, the customer must be notified.
In creating a successful business, you must keep up to date and be imaginative with process automation. Using a Direct Debit scheme, like an automated recurring payment system, is a process that will allow your business to save time and money that would previously be spent on admin.