What is Direct Debit?

Confused about Direct Debit? Get the facts you need right here.

What is a Direct Debit?

Direct Debit is an instruction from a payer to their bank that authorises an organisation to collect payment directly from the payer’s bank account. Direct Debit is an automated payment method preferred by 67% of the UK population.

Why Direct Debit?

  • Improves cash flow and control of funds
  • Saves time spent on administration
  • Saves time because you know who has paid
  • Provides flexibility of different collections

What is required to collect using Direct Debit?

To collect payments via Direct Debit, you need to have a UK bank account, a “license” and a method to process the Direct Debit transactions. The license is called a Service User Number (SUN) and is provided by:

Facilities Managed Service

A third party (e.g. a Bacs Approved Bureau), if you are unable to obtain a SUN through your bank. At SmartDebit, this is known as our Facilities Managed Service.

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Bureau Service

Applying to your bank and either using software to process Direct Debits in-house or outsourcing the processing to a Bacs Approved Bureau. At SmartDebit, this outsourced service is known as our Bureau Service.

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How can you sign up customers?

  • Online
  • Direct Debit Instruction (DDI) – formerly known as a “Paper mandate”
  • Telephone
  • Face- to- face
  • Telephone keypad
  • Interactive TV

Direct Debit improves your cashflow

With Direct Debit, you know how much your customers will pay you and when that money will be in your account – not just next month, but every month. That makes forecasting easier, supports medium term planning and allows you to optimise your outgoings.

Direct Debit reduces the cost and complexity of payment handling

Direct Debit takes a lot of the manual effort out of getting paid. It means you don’t have to produce, and chase, all those individual invoices. It reduces the number of payments you need to collect by phone, cheque or other means. And it can simplify accounts reconciliation.

Your customers expect to pay by Direct Debit

Customers are used to Direct Debit. They trust it, as a means of paying their bills – with minimal hassle. The average UK adult already pays more than five organisations by Direct Debit. If you don’t offer it, you could be missing out.

Direct Debit can help decrease your churn rate

Once a customer has signed up to pay by Direct Debit, they keep paying by Direct Debit – the agreed amount, on the agreed date, unless either you or they specifically request that the payment changes. That encourages customers to stay with you and use the service or product they are paying for.

Ready to start improving your cash flow?

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