advantages of Direct Debit
There are many advantages to Direct Debit, With Direct Debit, businesses know exactly when the money is coming in and how much they're going to receive. It's easy to set up, cost effective to operate, and takes changes in payment levels and VAT alterations in its stride.
For the supplier:
Improved cash flow
Good, reliable cash flow is key to running a successful business. One of the best ways of achieving good, reliable cash flow is to know when money is coming into the business, and one of the best ways of achieving that is to set up a Direct Debit system. Direct Debit gives you certainty with your income and allows you to plan accordingly.
Direct Debit puts the supplier firmly in control.
Whether you're a small company, in which case much of the cost will come in time, or a big business with a full blown and expensive accounts department, asking for money and then chasing it is expensive. Raising invoices and chasing payments takes time. And it's often not terribly productive. Companies like to hold on to their money for as long as possible and have developed myriad strategies to help them do just that.
With Direct Debit, they can't. If the money is in their account on the agreed payment date, it comes to you. No argument.
Payment amounts and times are easy to change, once again putting the supplier in control
Huge reduction in paperwork
Everything is done bank to bank and electronically. As a result, there is no need for huge amounts of paper, which is costly to administer and store.
Cheques take time to pay in and even longer to be cleared. A Direct Debit is paid into your account automatically and clears quickly. You can see it's there.
Immediate notification of problems
If one of your customers has a cash flow problem, and they pay by cheque, when do you find out? When does a standard delaying tactic become a serious issue of non-payment? With Direct Debit, any non-payment is flagged up straight away, allowing you to take action much more quickly.
Easy set up
The system isn't complicated and the software required is easy to install. Changes to payment levels and VAT alterations are also very simple to implement.
The Direct Debit guarantee hugely reduces the risk of fraud.
High retention levels
Credit cards expire, and when they do, customers can disappear as they fail to renew their payments on the new card. Direct Debits are ongoing, which leads to fewer customers leaving.
Anyone can pay by Direct Debit
All customers need, whether they are a business or an individual, is a UK bank account.
Works with all sizes of business
Very big companies can deal directly with Bacs, but most businesses take advantage of a Facilities Management Bureau. These bureaux will do all the hard work for you in terms of setting up the Direct Debit system and the accounts for your payers. They will also ensure that funds are cleared quickly, your name appears on the customer's account and that any failed requests are re-submitted.
For the customer:
Spreading the cost
With Direct Debit, customers can spread the cost of an item over a number of months rather than having to pay for it all in one go.
Ease of payment
Direct Debit eliminates the risk of missing or making a late payment (which could incur a charge.) Once it is set up, there is no need to lift a finger. The payment sails through.
High levels of protection
The Direct Debit Guarantee ensures that customers are protected at all times and can cancel without fuss.
Better levels of service
Less human involvement in the process means less chance of a mistake which gives customers a better level of service.