Direct Debit - the myths and the truth
It is a fact that companies which use Direct Debits to collect the payments they are owed will have greater control over their cash flow than companies that don’t. It doesn’t matter how many (dozens a month) or how few (once a year) payments you collect, with Direct Debit your cash flow is entirely manageable and predictable giving you peace of mind while allowing you to concentrate on growing your business.
Some facts about Direct Debit:
• Almost 4.4 billion Direct Debit transactions were processed in 2018 - that’s more than eight Direct Debits for every UK adult
• Over 1.6 billion Direct Debit payments were processed for utility and household bills
• Nine out of 10 British adults have at least one Direct Debit commitment, with 73% of household bills paid this way.
• 62% of people in GB prefer to pay regular bills by Direct Debit, with 41% advocating it for all regular bills.
By any measure, these are impressive statistics, and yet despite the popularity of Direct Debit it is still surrounded by myth and misconception. Here, we’ve taken five popular myths about Direct Debit and debunked every one…
The myth #1
Direct Debit is only suitable for large companies.
It's not hard to see why this myth exists.
For many of us, our first use of Direct Debit was when we set up an automated payment for utility or telephone bills to a large multi-national organisation, which inevitably leads us to think that Direct Debit is the preserve of large companies.
The truth is somewhat different, however. For any business the significance of managing cash flow is of paramount importance and companies which collect regular payments by Direct Debit can manage their cash flow much more easily that companies that collect payments by other means.
It doesn’t matter if you collect dozens of payments each month or just one payment a year, Direct Debit means that business owners know exactly what money is coming in and when – no matter their size!
The myth #2
Direct Debit is of no benefit to my business.
Poor cash flow is one of the main reasons SMEs go bust. The biggest and healthiest looking order book in the world is no use if no money is coming in.
Late and missed payments continue to be major issues for businesses. A recent survey showed that over half (54%) of small businesses are affected by late payments.
Getting the money in the traditional way, however, can be easier said than done. Cheques are forever 'in the post', the accounts clerk is perpetually 'on holiday', and the person who needs to sign off the invoice is always 'out of the office.'
With Direct Debit, those problems disappear instantly. With Direct Debit businesses know exactly when the money is coming in and how much they’re going to receive. It’s incredibly easy to set-up and cost effective to operate. And if for any reason a customer does miss a payment, your Direct Debit processing company will flag it up straight away, so it can be sorted out quickly.
Once businesses sign up to Direct Debit as a payment collection method, they tend to see an improvement in customer retention rates. Most people simply prefer to keep paying automatically rather than looking for a new supplier.
The myth #3
Direct Debit is expensive to set up and manage.
There is a perception that using any third party to collect money must be costly. Look at the figures, however, and it compares favourably with the cost of processing cheques or credit card fees.
Additionally, Direct Debit enables businesses to save many hours of laborious credit control. With Direct Debit there’s no need for your accounts team to chase invoices so companies can put their employees' time to much better use, or possibly even reduce staff costs.
Eazipay sets the gold standard in Direct Debit management. Our levels of customer service are second to none, our set-up process is very simple and with Direct Debit collections starting at just 42p per transaction; it’s incredibly cost-effective to operate.
The myth #4
A Direct Debit system is difficult to set up.
Setting up a Direct Debit payment system takes about a month in total – dependent on bank approvals and credit checks etc. The process itself is incredibly simple and adding new clients can be done in minutes.
All you need to do is provide the necessary information about your new payer. The bank is then given five working days’ notice that there is to be a new Direct Debit; on day five the payer’s account is then debited and the funds credited directly to a unique client holding account, which is personalised in your company name.
Cleared funds are then transferred to your account on day seven.
It’s that easy and once your clients are set up the payments go through automatically at the frequency you specify – monthly, or as infrequently as once a year.
Eazipay offers total support every step of the process and once the system is up and running our expert staff are always just a phone call away should help be needed.
The myth #5
Setting up a Direct Debit with a customer is time consuming.
It always used to be the case that new Direct Debit customers had to sign a paper instruction. This involved either a face-to-face meeting or communicating by post. In any event, it could become a time consuming and sometimes lengthy process.
Times, however, have moved on. Considerably.
Today, paperless Direct Debits are much more common. Customers can sign up over the phone, via email or online and all three ways are much quicker and less labour intensive.
These new methods also improve accuracy and, because they are so easy, increase sign-up rates.
Eazipay’s Paperless Direct Debit sign up scheme manages all of this for our customers. It saves time and reduces the risk of entering invalid information for new payers.
Eazipay helps business large and small access the power of Direct Debit. Thanks to over 20 years’ experience, we are perfectly placed to help you improve your business’s cash flow management processes and save you time and money by establishing regular payment collection via Direct Debit.