About Direct Debits
What is Direct Debit?
Direct debit is legal instruction made from the bank account holder to his/her bank. A direct debit instruction authorizes your business to collect varying amounts from your customer’s account, under the provision that the banks and account holder have been given advanced notice of the amounts and dates of debit collection.
Once a direct debit instruction has been authorized, the agreed upon amount of money will then be automatically deducted on fixed dates that you determine. The benefit of direct debits is that it safely and conveniently automates regular payments, such as those made for monthly subscription payments for classes or monthly membership fees. It also means that businesses can now retain regular cash flow every month, save on resources and also better project their earnings in the long run.
Does my business need direct debit?
Direct debit standing instructions are encouraged for businesses that require regular payments from their customer base, such as businesses in the fitness industry or parents with children in child care centres. Statistically, 80% of failed transactions are due to insufficient funds in the customer’s account. The good news is that 60% of these failed payments can still be collected simply using the Ezypay direct debit system using our software to re-bill the payment. In this manner, offering your clients a direct debit feature saves you hours (or even weeks of manpower) in chasing after dishonoured payments.
Businesses that deal mainly with recurring income (such as companies in the fitness industry) are encouraged to consider direct debit as an alternate payment method.
What is the difference between direct debit and direct credit?
A direct credit transaction is a payment deal made from customer to business via internet banking. A direct credit is usually done for once-off transactions.
On the other hand, a direct debit transaction also involves the movement of money available in a customer’s bank account to the business bank account. The main difference between a direct debit and a direct credit is that customers are not required to repeatedly fill in their details for follow-up payments after the initial setup, which initially allows customers to “set and forget” about having to manually pay the same payment (e.g. bills) every month.
What are the business advantages of direct debit?
Direct debit payment is a convenient, automated payment option for your customer in a card-less, paperless environment.
Businesses can now decide when they get paid and also rapidly reduce the number of late payments received. The amount collected and frequency can also be varied, allowing the business to stay in control of payments.
The entire collection process via direct debit can effectively reduce hours needed to receive payment. Overtime, automating your payment process could save your business hours, weeks or even months in human resources!