How to Manage Direct Debits
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It’s no secret that when you run a business, there’s a lot to do! As well as trying to stay innovative and keep ahead of the competition, there’s a wealth of menial tasks to deal with. Businesses often struggle with keeping up with even the most basic of admin tasks–including managing incoming payments. And although direct debit is an effective and convenient payment method, it can be difficult to manage when you don’t have the right system. We’ll take you through how to manage direct debits and how a powerful payments system, like Biz Core, can help your business!
What is direct debit?
Before we explore the best ways to manage direct debit, it’s important to understand what direct debit is.
Direct debit is a payment method that’s been around for a long time. It’s an automatic transaction that allows a business to debit a customer’s bank account at an agreed upon schedule. Though it originated in the UK in the late 1960s, it is now one of the most common payment methods used by businesses in Australia.
While it’s commonly used for utility bills (such as gas, water, and electricity), it’s often also used for:
- Loan payments
- School fees
- Childcare payments
- Insurance payments
A direct debit transaction can be a once-off payment or a recurring payment, typically with a weekly, fortnightly, or monthly schedule.
How do direct debits work in Australia?
In Australia, a business must be approved as a direct debit entry user by a financial institution in order to make or collect direct debits. Businesses also must have a direct debit authority form from each customer in order to authorise direct debit payments. These requirements help to reduce fraud, making direct debit one of the safest forms of payment in Australia for businesses and their customers.
What are the pros and cons of direct debit?
Just like any payment method, there are advantages and disadvantages of direct debit.
It’s a secure form payment
Businesses must be approved as a direct debit entry user with a financial institution in order to process direct debits. They must also obtain a direct debit authority form. This reduces the risk of fraud, making it a safer form of payment for both parties.
Additionally, if your business uses a direct debit system with built-in security, like Biz Core’s multilayered Microsoft Azure Cloud Security, then direct debit becomes an even safer payment method.
Reduces the risk of missed payments
Missed payments often occur when customers forget to manually pay their invoice, or because the debit or credit card they have on file has expired. Direct debit eliminates these two occurrences, thereby reducing the risk of missed payments.
More predictable cash flow
As direct debits are scheduled, it can be easier for businesses to predict income and potential cash flow.
Saves your business time and money
Direct debit can save your business from spending time and money chasing late payments and manually processing payments. This will leave you more time to grow your business and focus on more important things.
First direct debit payments can be delayed
Direct debits will typically clear within one business day. However, depending on a customer’s banking institution, first-time direct debit payments can be delayed by multiple days. After the first payment, direct debits should clear within the standard business day.
Failed payments can still occur
While you can reduce the occurrence of missed payments with direct debit, it’s impossible to get rid of them completely. Customers will still need to ensure they have enough funds in their bank account at the time of the direct debit.
Customers can be reluctant
Customers can be reluctant to commit to direct debit. Often, they will need to develop a trust with a business before they will commit to direct debit. However, businesses can mitigate this with attractive incentives.
What is the best way to manage direct debits?
While it’s important to know what direct debit is and how it works in Australia, you’ll also need to know how to manage it.
The best way to manage direct debit is through an advanced payment processing solution, like Biz Core. With the right payment processing platform, you can keep your payments secure, organised, and automated.
- With a sophisticated payment management system like Biz Core, you can:
- Streamline the direct debit process for both you and your customers so that the set up is easy.
- Automate payment management processes, including automatic invoices, reminders, late notices, and receipts.
- Provide comprehensive data protection through built-in security, like Biz Core’s Microsoft Azure Cloud Security.
- Offer flexible payment schedules, such as weekly, fortnightly, or monthly.
- Track customer information, interactions, and sign up dates, so that you can offer a personalised experience for your customers.
Biz Core makes setting up direct debit payments a breeze, for both you and your customers. Our setup process is completed in just 3 easy steps:
- Set – Enter the payer details into Biz Core and set the payment schedule. The platform has purpose-built tools to make this quick and painless.
- Sign – Once set, our smart software will automatically email a direct debit authority form to the payer which can be signed online.
- Forget – Biz Core knows when the form is signed and will store it for you. Direct debits will now be automatic from the first scheduled payment date.
Contact our friendly team today for more information and a live demo!
Why is it so important to manage direct debits well?
The business world in Australia can be tough. In fact 60% of businesses fail within the first 3 years. Even with 50% of those businesses actually turning a profit. These can be scary statistics for any business owner. But it’s important to remember that by managing your business well, including ingoing and outgoing payments, you’ll be better placed to succeed.
Payment systems, like Biz Core, allow you to take the focus off things like direct debit payments, and instead focus on keeping your business innovative and adaptive.
For a direct debit solution look no further than Biz Core
Biz Core is committed to supporting Australian businesses to succeed and grow. We provide you with the tools and the support you need to stay innovative and adaptive–all while keeping your customers happy!
Contact us today for more information on how Biz Core can support your business to succeed and for a free live demo.
Direct Debit FAQs
Is BPAY the same as direct debit?
Direct debit and BPAY are different. Direct debit is an authorised automatic transaction that allows a business to debit funds from a customer’s account to the business account.
Short for ‘bill payment’, BPAY is a service that allows someone to pay their bills through online or mobile banking.
Can someone set up a direct debit without my permission?
No. To set up a direct debit, a business must be approved as a direct debit entry user by a financial institution. A signed direct debit authority form is also required.