Collecting payments by is quickly becoming standard business practice in the United Kingdom. Recent statistics published on the BACS website indicate that over 3.6 billion Direct Debit payments are processed yearly, with nine in every ten adults having at least one Direct Debit in place.
What are Direct Debit Payments?
Direct Debits are instructions from a customer to their bank or building society that authorises a service user to collect specified amounts of money from their account. In typical circumstances, a standing authorisation is set up between the two parties and authorisation is granted for the collection of varying amounts. This will only happen if the payee has received advance notification of the amounts and collection dates.
(Diagram 1 – Explains how Direct Debits work in conjunction with the description above)
What are the benefits of using Direct Debit payments?
A practical and efficient way for businesses to collect customer payments, using Direct Debits carries a number of benefits including:
- Simple setup – The straightforward setup process means customers can pay quickly and easily
- Cost savings – the instantaneous nature of Direct Debit payments mean that time-consuming manual reconciliations are reduced or eliminated completely
- Certainty of payment and peace of mind – Amounts due from your customers will always be credited to your account
- Security and reliability – Highly secure, built-in safeguards protect both parties
- Greater financial control – With the knowledge of when your account will be credited with cleared funds, cash flow can be managed more accurately
- Direct Debit Guarantee – Advance notice about Direct Debit charges and an immediate money back guarantee make transactions risk free
To find out more about how to set up Direct Debit payments, take a look at our free guide by clicking on the link below.
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