Direct debit – A great tool for your business (Part 1)
Direct debit is not a new payment method. In fact it is a proven and reliable means of collecting fees and payment instalments across a number of industries. In fact the number of direct debits has increased 10% annually for the past decade with approximately 2 million direct debit transactions being process daily in 2008 (Ref APCA).
So why is direct debit so popular and why are businesses using it?
- Direct debit gives you more control over your debtors. Often small business owners issue invoices, nominate payment terms and on the date they expected the funds the payment is not made. Obviously people are busy but these delays in payment can seriously affect the cash flow of a small business.Direct debit significantly reduces the time it takes for your business to be paid. Payments are made on the agreed date between you and your customers.
- Direct debit can also increase the attractiveness of your high value products. Many of our retail customers use PeopleHub Online to sell their products by accepting instalments over time. In this way they make their products more attractive and thus easier to sell.
- Direct debit can assist in automating the collection of regular payments
Avoiding the pitfalls of direct debit (Part 1)
While it may seem strange for a payment company to spell out the risks of direct debit, we believe it important to provide a balanced view of some of the difficulties that can arise. By understanding some of these issues, your business will be able to better navigate the traps of what is otherwise an excellent method for collecting your regular payments.
The first and most obvious issue with direct debit is that the account you are attempting to debit may have insufficient funds. This is logical given direct debit is a biller initiated transaction; it is not possible to know whether sufficient funds exist prior to debiting the account. Not only does a default require some action from you, it can also mean your customer has incurred a fee from their financial institution.
As a business there are several things you can do to reduce this risk, but they all essentially relate to communicating with your client:
- Ensure it is clear in the contract when payments will be debited and then provide a copy of that agreement to your client for their future reference,
- Send reminder messages to your client when a payment is about to be debited,
- Provide
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Welcome to Direct-Debit.com.au! This site is designed to help you get the most out of your billing process in general, and direct debit in particular.
Here you will find lots of information to help you decide what is best for you, and what to look for in your billing partner. Use the menu on the right to check out the helpful articles on the topic
Please take the time to read this site now, because it will hopefully save you lots of time later on.