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 can be made via Direct Debit Companies, and the customer must be informed in advance. It can take several working days to process a Direct Debit.
Take these measures to begin withdrawing funds from a customer’s account.
Create a mandate or authorisation document that your customer can sign. A mandate should include the following information:
- Name of the account holder.
- Account number from a bank or a building society.
- Sort code for the branch.
- Complete postal address of the bank/building society.
- Contact information for the account holder.
You can gather this information by giving your customer a hard copy of the form or an online form to fill out and return to you. You may also collect the customer’s information over the phone, but a bank must authorise the script.
Obtain the customer’s mandate and apply it to your bank. Most banks would typically take 4-6 days to activate an order.
Once the mandate is activated, you must alert your customers ten days before authorising payment. The funds will be available in your account 3-5 working days after the payment date.
If you initiate a charge and it fails, you will receive a message from Bacs informing you of the reason for the failure. You then need to talk with your customers to explain the situation.
There are two ways to use the Direct Debit program. You should choose the best approach based on your organisation’s financial situation, administrative capabilities, and transaction volume.
The two ways to use the Direct Debit scheme are:
- Direct access via a bank
- Access via a Direct Debit bureau
Direct access is preferred by large companies or organisations that can handle the Direct Debit process independently. Direct submitters are organisations that use the direct access process.
While direct access has the lowest transaction costs, the initial setup cost is relatively high. The low transaction costs outweigh the initial costs for companies that handle significant amounts of recurring payments.
Access through Direct Debit Bureau
You may use a Direct Debit bureau if you don’t have the required turnover or want to avoid the extra work of managing Direct Debit in-house. Direct Debit bureaus are third-party organisations that operate Direct Debit payments and most associated work on your behalf.
When making payments through a third-party bureau, you can use either your SUN (Service User Number) or the SUN of the bureau. Since only your company’s name appears on your customers’ bank statements, using your own SUN is the best choice. However, if you need the payments to start quickly and don’t mind the bureau’s name appearing on your customers’ transactions, you can use the bureau’s SUN.
Direct Debit is an easy and practical option that gives you full control over your payments, even recurring payments. Its low failure rate and low need for manual intervention make it appealing to both consumers and businesses. So, if you provide regular services and are looking for the best payment method for your company, Direct Debit is an option that has the potential to help you maintain a healthy cash flow.