What is a Direct Debit?

Waiting for payments from customers is undoubtedly one of the most frustrating aspects of running a business. Even before the pandemic hit, small and medium-sized enterprises (SMEs) were reportedly chasing more than £50 billion of late payments. But there is a solution: Direct Debits and Direct Debit Management Systems (DDMS).

Interbacs is a market-leading provider of reliable Direct Debit payment solutions. This means we are well-placed to answer all of your most frequently asked questions about Direct Debits, which is exactly what we have set out to do here. By the end of this read, you will have a much deeper understanding of the functions and benefits of both Direct Debits and our highly configurable DDMS software.

What is a Direct Debit?

A Direct Debit is a simple and convenient way for customers to pay their regular bills. Bacs, previously known as the Bankers' Automated Clearing System, is responsible for the clearing and settlement of all UK-based automated Direct Debits. Direct Debits enable you to automate your payments, which means you receive ongoing payments at regular, specified intervals, streamlining your admin and reducing your costs.

How does a Direct Debit work?

A Direct Debit works by providing an instruction from the customer's bank or building society that gives your organisation the authority to collect a pre-specified amount of money on an agreed date. Once those agreements are in place, your customer's money is deducted automatically. If any changes to the amounts collected or the date it is collected need to be made; those must be approved by the customer in advance.

Would my business benefit from using Direct Debits?

That generally depends on the type of business you run, but, by and large, most companies can benefit from the security and convenience of automated Direct Debit payments. If you have regular customers, Direct Debits can save you and them a great deal of admin. Likewise, if you offer subscription services or products that can be purchased in instalments, then Direct Debits can ensure your customers never miss a payment.

How to set up a Direct Debit?

Setting up a Direct Debit isn’t as taxing as you might think. Simply acquire a Direct Debit mandate (also known as a Direct Debit instruction or DDI) in writing from your customer. Then submit the mandate via Bacs, which can take up to 10 working days. Then, once your mandate has been accepted and you have given notice to your customer (usually 10 working days before payment is taken), you can begin taking payments. Interbacs can also assist you to become a Paperless Direct Debit originator so that everything is done online

What is the difference between a standing order and a Direct Debit?

Standing orders are regular payments set up by the customer, whereas a Direct Debit is set up by you – the businesses owner – with the customer’s express permission. Unlike standing orders, Direct Debits ensure you get paid. However, it is worth bearing in mind that Direct Debit indemnity means that customers retain the right to cancel any payment at any time and receive a full refund.

Does my business need a Direct Debit Management System (DDMS)?

Direct Debit Management Systems (DDMS) make it easy to edit, cancel and create new Direct Debits. With more than 30 years of experience delivering bespoke Bacs solutions, Interbacs is a leader in this field. Our DDMS software is a full Direct Debit suite that removes many manual tasks to create a highly automated service. Our configurable software enables you to use it in a way that best suits you and your company.

DDMS software from Interbacs validates your customer data and bank account details according to Bacs regulations. This means payment plans can be created and edited with ease. Our software also produces straightforward and easy-to-read reports so that you can make more informed decisions about your business. Save time and money with reliable, professional and innovative payment solutions and services from Interbacs.

Get in touch

If you want to learn more about how Interbacs can help your business expand, call us at 0161 667 0758. Alternatively, email us at sales@interbacs.com.