Both standing orders and direct debits are in regular use in today’s business environment.
Whilst standing orders are a relatively simple option for business bank account holders, there are a number of issues associated with this payment method that may render it unsuited to some businesses.
The two payment services in the main, do exactly the same job in that they are instructions to a bank that allow payments to be made on a regular basis to your sign stands business account. Both offer the account holder the opportunity to set an amount to be taken from their account on a regular basis and provide a simple solution for paying bills.
From a business perspective there are two key problems with standing orders:
Payment amounts can’t be changed without cancelling the existing instruction and setting up a new one, meaning that changes to your invoice amount cannot be made without a huge administration overhead.
Any unpaid standing orders can take up to a month before notification from the bank that they have in fact been unpaid. This could again impact on the administration and certainly the cash-flow of a business.
But it’s not all straightforward, as the direct debit service, particularly for small businesses is very difficult to acquire due to the strict risk-averse nature of the banks. It is however a service that’s available in the UK from companies like Eazy Collect who are a BACS Approved Bureau and can provide businesses with the facilities to take direct debits.
The direct debit service can be worth the time taken to set up if you have the following requirements:
The need to change your pricing quite often with automatic customer notification and no additional paperwork to be signed.
The ability to offer your clients flexible payment terms
Offer a customer guarantee where should any amount be found to have been taken incorrectly; it can be credited back when brought to the attention of the bank.
It may be worth taking the time to consider how your business collects payments particularly for recurring payments as either a standing order or direct debit solution could provide you with a much improved solution to manual payment collection methods.