The Direct Debit collection is the most secure and cost-effective way of receiving payment or making routine or sporadic commitments. A Direct Debit is an order from a customer to their payment service provider authorising an organisation to collect different sums from their account, provided the customer is given advance notice of the collection amounts and dates.
It can improve the efficiency, manageability, and cost-effectiveness of the organisation’s payment collection, which is why so many organisations of all sizes choose it as the preferred method for obtaining recurring payments from both companies and individuals. Some of the benefits are:
- It is less expensive than a cheque and more secure than cash.
- You have complete power over the date of receipt into your account.
- On a predetermined date, you receive cleared funds in your account.
- You will accumulate varying quantities on daily or sporadic dates.
- It may remove the need for time-consuming reconciliation. Only mistakes and non-payments will be notified to you, allowing you to perform exception-based reconciliation.
A Direct Debit can be set up using secure online banking, phone, or paper using a Direct Debit Instruction form. You can receive Direct Debit payments from your customers at any time as an organisation. Payment requests must be made via Bacs, and the customer must be informed in advance. It can take several working days to process a Direct Debit. This guide will walk you through telling your client, making a payment to Bacs, and receiving the answer messages.
Payment Notification to Your Customer
You must send the customer an “Advance Notice” before receiving a Direct Debit payment from them. The scheme rules essentially demand that your customer be notified of each payment before it leaves their account.
A single payment notice containing the frequency and number of daily payments of a fixed amount may be given. If, on the other hand, your costs differ in frequency or amount, you must include advance notice before each one, which must consist of the payment date and amount.
Sending Payment Requests to Banks
Payment requests are routed to banks via Bacs. Each request is redirected to your sponsor bank and the bank of your customer. Your bank clears your account on the due date when your customer’s bank debits theirs. The two banks then settle their differences.
Post-Submission
It takes several working days to determine whether a payment was successful or not. If you make a reasonable payment, your account will simply be credited. If, on the other hand, a payment fails, Bacs will give an error message.
Indemnity Claims
Customers may request a refund for Direct Debits taken from their account at any time under the Direct Debit Guarantee. Although only 0.2 per cent of purchases receive such refund requests, it is essential to understand the mechanism. Refund requests are communicated to merchants through a Bacs code. The money refunded to the customer is then immediately repaid from the retailer 14 working days later.
There are many reasons why you should accept Direct Debit payments from your customers. People prefer to pay by Direct Debit, which is a critical factor. A Direct Debit Instruction (DDI) is set up on the bank account of approximately 75% of the population, with the average individual getting five or more DDIs. Overall, Direct Debit collection provides many advantages to both consumers and receiving organisations.
