Direct Debits

[Jodimyatt]

I wish to take payment via direct debit in order to do this do i just copy a form and use my details or is there a legal method i have to follow.

 

[visagephoto]

Direct Debit forms are usualy available from your bank, you could either use this, or copy the information to produce a form more personalised to your business.

It's also a good idea to forward the completed form to the customers bank yourself, as some people conveniently forget to submit the form, especially once they have the goods.

I used this in the past and although the information was as clear as day, my bank managed to get it wrong by paying cash from my account to one of my clients

 

[Eagle]

You'd be wisest to speak to your bank to be honest.

 

[Ozzy]

To take DD payments you must be approved with Direct Debit Originator Status by your bank. This is an impossible task for any business under 5 years old, and/or without substantial substance.
This is because the bank is guaranteeing your business and the funds you take by Direct Debit - because DDO status gives you the originator unlimited access to draw whatever money out of your customers bank accounts whenever you wish.
There are a number of rules and regulations relating to DD that you must obide by and are trusted to do so with the originator status, and to get it your bank will want cash flows, business plan, balance sheet and P&L's. They will also want to see a substantial trading history.

I have obtained DDO for another company I used to work for in a past life, and are going through the process with Quick Formations at the moment. Believe me when I say the banks really don't make it easy!

Other options would be either Standing Order or Repeat Authority through a credit card merchant account.

 

[visagephoto]

Sorry

I was mistakingly reffering to Standing Orders, completely different from the Direct Debit Scheme

 

[Jodimyatt]

Well when i think about it, a standing order is what i need. As its a set amount each month for a year.

 

[Ozzy]

Ah, thats a damn site lot easier then

 

[visagephoto]

Jodi

You must bear in mind that Standing orders don't carry the same payment security as Direct Debits and can be cancelled at any time.

Not sure what products or services you are providing, but that's how I lost a lot of money a few years ago.

 

[BMS]

Jodie

As an incentive to your customers it might be worth while offering a small discount on the invoice / contract value for payment by standing order.

This is a policy that I use and it saves :

1. Time spent on credit control
2. Makes cash flow projection more simple

If you make sure that this is written into any quote / agreement that failure to pay to terms will render the discount void, it may encourage your customers to pay on time.

Also with the boom in online banking that most banks offer, it is a simple task for companies to set up SO's / DD's. I actually sat down with one of my clients at his premises and showed him how to do this (beat that for a possitive credit control policy !!)

Of course the secret is to add your SO / DD percentage/amount to your quote in the first place.

Good luck for you business venture anyway.

As a seperate issue are there any other businesses out there that have noticed that it takes 5 working days for a customers Barclays cheque to clear in your Barclays account....Don't follow how this can be....

 

[barry.hynd]

Hi Jodi,

I've had experience of setting up DDO also and would agree with Ozzy that it is quite a difficult process. I'm sure I read that you can actually use an intermediary to collect payments on your behalf. On the standing order front I share many peoples concerns over S/O as people can cancel them as and when they like. Might be best in this case to get them to pay in advance and then diary the payments to make sure they come out on time.

I guess it depends on what ure selling. If you have a mechanism where if they dont pay then you can stop access to that particular product or service then thats a good start to minimising risk. A simple credit check may also help too!

 

[BMS]

Jodie

It appears from reading through the replies to your original posting regarding DD's / SO's that there is a lot of suspision and lack of confidence in asking clients to pay by this method.

It has been stated that SO's can be cancelled at any time, this also applies to DD's ( bear in mind that a cheque can also be cancelled at source prior to clearing, so the only foolproof payment method is a handfull of cash) but what you have to bear in mind is that for your business this is still the most convenient way of receiving payments for your services.

With any business there is always the danger of having a customer who will not pay / delay payment as long as possible, it is the way that you handle this situation that determines the success of your business.

Having taken a quick look at your website it would appear that any payment problems could be overcome by blocking services to your customer as a last resort, I think someone has already mentioned the phrase "goods remain the property of this company until payment is received in full" or words to that effect. This is your get out of jail card should you need to withold or block services.

The way that contracts/agreements are set up should state payment terms to ensure your clients know what is expected from the start, but spend some time to develop a policy on credit control and stick to it is my suggestion, that way you can deal with all customers in the same manner.

From someone who has an average payment time from sending out an invoice to receiving payment of 6 days I think that your decision to receive payments by DD's / SO's is the correct one.

Should you wish to discuss this further, please feel free to contact me by PM.

Hope this works out for you.