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Direct Debit is a great way for businesses to take regular payments from their customers whether that is a standard monthly subscription or a variable amount.

The payment method works well for companies and saves customers time and effort - a great example of a real ‘win-win’ situation!

So what are the advantages of Direct debit?

Read on and we’ll explain.

 

What is Direct Debit and how does it work?

A Direct Debit is an automated payment processing method operated by BACS that allows a company to call for funds from a customer’s account.

The customer gives the business the authority to make a charge within certain parameters and the business’ bank, through the BACS system initiates and manages the payment process.

Apart from agreeing to the setting up of the authority (called a Direct Debit Mandate or DDM), the customer doesn’t have to get involved at all which makes it super-convenient.

It’s a very simple process but as you would expect there are strict rules that apply and customers always have the right to stop or reclaim payment through the Direct Debit guarantee.

 

What are the benefits for the customer?

The big benefit for the customer is convenience.

The customer doesn’t have to think about making a payment, doesn’t have to set it up with their bank and doesn’t have to make sure they don’t forget.

Having a DDM in place works for budgeting and customers value the ability to know exactly what is coming out of their account and when.

Having a regular automated payment method means that the customer isn’t at risk of service interruption if they forget to pay a bill.

In many cases, customers expect to see a variety of different payment methods that give them the chance to choose one that fits their lifestyle. Offering direct debit helps the customer to spread the cost of a major purchase or obtain a better service for lower upfront cost. 

 

What are the benefits for the company?

There are so many benefits to Direct Debits for a growing company that it’s hard to know where to start!

Cost - keeping expenses low is really important for any business that is expecting to grow rapidly and is often the first thing that businesses think about when they look at taking Direct Debits is the cost.

Direct debits are the cheapest method of accepting payments from your customers beating credit and debit cards hands down and the good thing for a growing business is that the method is scalable making it affordable however many customers you have.

Reduction of manual work - in terms of operations, Direct Debits make complete sense.

One of the problems that often affects growing businesses is that their payroll starts to run aways with them so keeping staff costs down is a must.

With Paysuite you can integrate with other systems using an open API and webhooks that takes the client instruction, submits it to BACS, receives the payments and then automatically reports to your accounting system, CRM or EPOS.

The lack of any manual intervention means that a business that is on a growth path doesn’t need to start employing people just to manage payments by hand. For established companies, the implementation of a DD solution can free up existing staff to get on with much more value add tasks.

Customer service - as we noted before, customers expect to see a variety of different payment methods and this is another way to show that you are responsive to their needs.

Customers will switch their allegiance to a new company if it is easier to deal with and gives them the functionality, products or services that they need.

Customers really value the ability to pay for larger purchases over a longer period and interestingly there is evidence that offering terms can increase the average spend.

Cashflow - One of the keys to keeping up speed of growth in an expanding business is to make sure that you are on top of your cashflow.

Speed is important when you are bringing in cash and direct debit is a much quicker way to receive payments than waiting for your customers to decide to pay their bill.

Reputation - Newer businesses need to build their credibility quickly so anything that shows potential customers that they are dealing with a professional concern is of massive value.

One of the interesting things about Direct Debits is that it increases confidence in the business. Research has shown that customers who pay using well set up electronic methods have much greater confidence in the merchant than otherwise.

Forecasting - As you grow your business you’ll come to realise that having access to accurate information is invaluable and being able to forecast accurately is a key plank of any business strategy.

Your finance team will love the certainty that comes with having a direct debit payment system as it allows them to know exactly when payments will hit your bank account and how much will be received which is incredibly valuable when you are wanting to run an accurate cash flow forecast.

For growing businesses, it is important to make sure that you have a sustainable business model and being able to take DDs means that you have a cheap and scalable way to develop your business, moving from single transactions to a subscription-based operation.

How to get set up for Direct Debits

Naturally, there are rules around how you take DDMs from your customers and submit them to BACS for processing.

You need to have a secure system that allows you to log authorisations from your customers, submit payment files into BACS in the correct format and then deal with messages that come back that relate to cancellations and changes to bank details.

The fact is that for any sensible business that wants to grow, a professional system is a must and Access Paysuite fits the bill.

Access Paysuite is simple to learn, a doddle to operate and gives you complete confidence that your payment processing is being done in a safe and secure way.

Why not click the link and arrange your free, no-obligation demonstration and let us show you how easy taking Direct Debit can be.