What is Direct Debit Collection?

Consumers find Direct Debit a convenient way to make payments, due to easy set up and cancellation processes. According to a recent consumer consultation report, Direct Debit remains the most popular method for users to pay their regular bills. 

In light of this, it makes sense for businesses to ensure their transaction procedures are accessible so that revenue streams are consistent and customers have a straightforward way to pay. 

With Direct Debit payments set to record steady growth over the next decade and reach around 5 billion payments by 2033, organisations looking to build towards their goals could consider integrating Direct Debit collection into their payment systems. 

Contents

• What is Direct Debit collection?
• How Direct Debit collection enhances your business.
• Supportive Direct Debit collection services with Interbacs. 

What is Direct Debit collection?

Understanding exactly what is Direct Debit collection supports businesses to expand their payment method offering to customers and strengthen their financial flows to meet monthly and annual targets.

If your business wants to learn how to start collecting Direct Debit payments, the fundamentals about Direct Debit collection could help you get started. Direct Debit collection is a process where a customer authorises an organisation to collect an agreed amount on a pre-agreed date from their bank account. 

Direct Debit collection involves:

• A DDI (Direct Debit Instruction) form or mandate is completed by the customer and shared with the relevant company. This mandate can be completed over the phone, online or on paper. 
• The business arranging the Direct Debit shares this mandate with the customer’s bank to gain approval and to notify them ahead of time that this payment will take place.
• The customer and payment information is sent to Bacs so that the data is processed and payments will go ahead as agreed by company and customer. 
• The customer is notified ahead of time that the payment will leave their account on the agreed date for the amount in the DDI.
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It’s also good for your business to know information around what is a Direct Debit guarantee so that there is transparency over customer protections. 

A Direct Debit Guarantee protects consumers against any errors made in the collection of their Direct Debit. It also means that if a payment is taken incorrectly, the customer is entitled to a refund. 

How Direct Debit collection enhances your business

With numerous advantages to its name, Direct Debit collection enables you to deliver increased consumer convenience while securing cost efficiencies. This is because installing a regular payment system is more cost beneficial, particularly in relation to payment by card. 

Here are six popular benefits to Direct Debit collection:

• 1. Increased efficiency

Direct Debit automation decreases the time burden and manual elements that hamper more traditional payment options. Bacs automates the collection of Direct Debits so that invoicing and payment identification is more time efficient and cost effective. 

• 2. Expanded transaction volumes

Customers have a greater ability to access Direct Debit payments due to their flexible nature and simple organisational structure. As the system is more dynamic and agile, businesses are able to offer customers a variety of payment options, attracting a wider customer base. 

• 3. Enhanced security

Bacs and the banking institutions approved to manage Direct Debit collections maintain robust and resilient security measures. These can include fraud prevention protocols, ensuring both organisations and customers are protected according to regulatory requirements. 

• 4. Detailed reporting

Due to the comprehensive nature of Direct Debit reporting and data analysis, organisations can optimise this information to support more accurate forecasting and reporting. This enables them to improve financial modelling and forecast future revenue predictions with increased precision. 

• 5. Decreased failure rates

In comparison to card payments which have a transaction failure rate of between 5-15%, Direct Debit failure rates are typically less than 3%. Therefore, Direct Debit payments provide a more secure foundation to help businesses grow. 

• 6. Improved Cash flow forecasting

Direct Debit collections can positively impact cash flow forecasting. This is because Direct Debits provide a stable and predictable financial stream which enables more certainty for financial planning. 

Additionally, Direct Debit collection services empower businesses with streamlined operations and flexible workflows, creating more space to reduce payment errors and work strategically on future goals. 

Supportive Direct Debit collection services with Interbacs

Interbacs is a Bacs Approved Bureau and Bacs Affiliate, with specialist experience of Bacs rules and their application for Direct Debit payment systems. As one of the very few UK companies to achieve Bacs Affiliate status, we also have a say in the future of electronic payment processing in the UK. 

With this level of expertise, we give you the best available current advice regarding your Direct Debit payments and ensure you have the most appropriate system in place to suit you and your customers. 

With a proven track record in successful Direct Debit management for UK businesses and with a renowned industry reputation, Interbacs are expertly positioned to support all of your business account needs.

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