The Benefits of Using Ad Hoc Direct Debit

When people imagine direct debit, they often think recurring payments, they think signing of DDI (direct debit instruction) and then associate this most with paying utilities, phone bills, gas, electric etc. Businesses are increasingly discovering the value behind direct debit to manage their recurring payments and get a greater handle on their cash-flow.

What people don’t often realise is that Direct Debit also provides a quick & easy way of making ad hoc or one off payments, which can be useful for a number of reasons.

  • Businesses – Besides giving your customers the correct notice of the payment and the payment collection date, you do not need to sign any new agreements (assuming the initial DDI has been signed).
  • Customers – Whilst customers won’t initially be interested in the idea of ad hoc payments, what it does mean is that they don’t need to worry about any additional paperwork. The important element here is that for the customer this process feels seamless.

Not every business will need/make use of this kind of payment model regularly, those businesses with fixed monthly contract price for example. However, even businesses like this need to adjust prices from time-to-time, having signed a DDI will enable them to make the change with little issue.

The real strength for ad hoc payments are for companies whose monthly billing is more likely to change (like SaaS companies, or service-based), but also for those whose payments are less regular, or liable to change more frequently.

Cost of Collections

One of the more appealing aspects of using Direct Debit to collect ad hoc payments is far-cheaper than doing so over credit/debit cards. Card payments costing up to three per cent of the transaction value as well as a flat fee of up to £0.30.

Direct debit payments, are generally cheaper than card by about 30-60%. Using our payment portal to manage this means that you also save time in administration of processing cheques/card payments as well as handling cash. An even greater cost saving!

Another Advantage Over Standing Orders

Direct Debit still gets heavily compared/contrasted with Standing Orders, which is understandable, but fundamentally wrong in the same instance. The only real similarity between the two methods is that you’re establishing regular payments, but that’s where it ends.

As a Standing Order is initiated by the payer & only lasts for a fixed length of time. Being down to the payer also means that the cash flow cannot be ensured for the business. More critically, is that Standing Orders cannot be changed after it is setup – which significantly reduces flexibility.

Whilst Direct Debit is entirely in the control of the payee, they still have to provide 10 days notice before making changes. This provides flexibility to both parties, whilst ensuring that neither side loses sight/control of what is being collected/payed.

Are You Ready for Ad Hoc Direct Debit Payments?

If you’ve already got a signed DDI from your customers, ad hoc payments becomes a really strong option – you don’t need to chase for completion of paperwork, or more importantly chase for payment itself.

If you’re not yet collecting payments via Direct Debit, it can be one of the best ways for securing cashflow in your business, we’ve released an ebook giving you the essential information you need to know about the Direct Debit process.

For more information, please get in touch and one of our team can answer any questions you may have.