The Benefit Of Getting Customers Paying By Direct Debit
Many businesses in the UK are choosing to change their regular invoice collection over to Direct Debit, where payers are given 10 working days' notice of the value of their invoice, and that amount is taken from their bank account automatically. Direct Debit is extremely convenient for your customer as they don't need to write a cheque or schedule a bank transfer. And for you, it ensures that the funds are received on time.
Direct Debit also reduces administration costs; the whole system is based on a 'reports by exception' ethos, meaning that you only need to deal with things that have failed, e.g. unpaid amounts, cancellations and rejections, so the time taken to reconcile your accounts is significantly reduced.
While you can insist on Direct Debit as the form of payment for new customers, it can be a chore to move your existing client base over to the new payment method due to their resistance to change.
If your business is serious about moving all invoicing over to an automated collection solution you have a decision whether to wield a stick or dangle a carrot; that is enforce payment by Direct Debit by no longer accepting any other forms of tender, or to incentivise customers to move to the new payment method.
Incentives that can be used are:
Flexible payment dates: A customer will feel more in control if they can choose the date that their payment will be taken. Offer more than one date to make them feel in control.
Direct Debit Discount: A discount for paying by Direct Debit, or a charge for payment by another means both achieve the same result - it's cheaper to pay by Direct Debit.
Prize Draws: Although somewhat a gimmick, a number of councils and other organisations put their customers in a prize draw where they can win a cash prize, or electronic goods such as mobile phones, MP3 players and e-book readers.
In addition to incentives, and the perception of integrity that taking payment by Direct Debit gives to customers, there are other benefits by paying this way. For example:
Convenience: Paying by direct debit happens automatically, so as a payer, you just need to sit back and relax while the bank takes care of the payment.
Cheaper: With many firms now offering a discount for payment by direct debit, it's undoubtedly the cheapest way to pay.
Instalments: Many companies require payment upfront, unless paid by Direct Debit in which case a monthly instalment option is usually available.
Traceability: Direct Debits are clearly shown on a bank statement with the date, amount and who the payment was to so it's simple to track what was paid and when.
Guaranteed: All payments are protected by the Direct Debit guarantee meaning that if a payment is taken early, late in error, or for the wrong amount, a refund from your bank is guaranteed.
In world where more and more payments are made electronically, it is important to begin embracing the change sooner rather than later. Making preparations now to move payments to Direct Debit will stand a company in good stead when more manual forms of payment such as cheques become obsolete and are eventually withdrawn.
When looking into taking payments by direct debit your bank may be reluctant to provide you with the service; this is because the Direct Debit Guarantee, designed to protect payers, introduces an element of risk to the relationship. If this is the case, then contact a BACS approved bureau who will be able to apply for access to the Direct Debit service on your behalf and can advise on what service will be the most cost effective for your business.
About the Author
My name's Viv Halom and I've been working with Eazy Collect for almost 10 years, helping companies to process direct debit payments from their customers. Our job is to help companies get paid on time.
As a BACS Approved Bureau, Eazy Collect adheres to strict regulations to ensure your and your customers data is completely secure.
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