How to start collecting Direct Debit payments
So, you’re thinking about collecting payments using Direct Debit. Collecting payments with Direct Debit is maybe the best option for small or medium sized businesses to collect regular or one-off payments.
In this article, we’re going to run through the steps to follow and tools you’ll need to get started with Direct Debit. Watch our video below or read on to learn more!
1. Acquire a Service User Number (SUN)
You can acquire a Service User Number, or SUN, from a sponsoring bank, which will allow you to start taking Direct Debit payments yourself. However, there are a number of steps and administration processes you still need to follow in order to comply with the Direct Debit scheme rules, as listed in the steps below.
Because of the amount of admin required to handle Direct Debit payments, or the strict requirements to gain a SUN, many small to medium sized business opt to use a third party, referred to as a Facilities Managed Bureau (such as London and Zurich) to gain a SUN.
A Facilities Managed Bureau will provide you with a SUN, and take care of all the admin listed in the steps below, making it easier and faster to start collecting Direct Debit payments.
2. Get Direct Debit Instructions from customers
Once you have your Service User Number, you need to contract with your customer and get a Direct Debit Instruction signed with them.
A Direct Debit Instruction (DDI) is an authorisation between your customer and their bank for funds to be withdrawn from their account to pay for your services. A Direct Debit payment cannot be initiated without a fully complete and signed DDI.
You can get DDIs signed over the phone, online, or by post – it’s up to you, but online is typically the most efficient method.
3. Get a mechanism to send DDIs to the bank
Your Direct Debit Instruction needs to be sent over to the banking network so that your DDI appears on your customer’s bank account. Paper DDIs need to be sent via post, and if you are sending electronic DDIs you will need to use a software system.
You can either source your own software, or if you choose to work with a Facilities Managed Bureau they will provide you with a system.
4. Set up Advance Notice
Next, you need to send an Advance Notice to your customer by email or post, telling them who you are, how much you are going to collect from them and when you’re going to take the payment. This must be sent a minimum of 3 days in advance of the payment collection date.
5. Get a Direct Debit scheduling tool
Once you’re ready to collect, you need some kind of scheduling tool that allows you to set the date of the collection and the amount to be collected.
Again, you can either source this yourself or use a Direct Debit bureau.
6. Reconcile your collections
Direct Debit collections can sometimes fail, if a customer lacks funds in their account, their account has been closed, or there is a dispute over the payment.
For this reason it’s important to be able to report and reconcile your collections, so you can identify when and why a payment fails, so you can attempt to collect what is outstanding or look into the matter further.
If you have a lot of collections, this can be hard to manage without using some kind of reconciliation tool, which will typically be provided as part of a Facilities Managed Bureau service.
Collect Direct Debit payments with London and Zurich
We are a one-stop-shop for all of your Direct Debit collection needs. As a Facilities Managed Bureau, we offer all the tools to help you collect Direct Debit payments with no fuss.
Let us help your business grow and thrive – contact us today!