- November 28, 2021
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- Posted by: user
Direct debit is where you can take payments straight from your customer’s bank account. So it’s much more convenient for your customer (they don’t need to do anything – other than give you the initial permission) and it’s a very sure way for you to get paid on time without any issues or hassles.
Direct debit can be used for most kinds of payments but is really suitable if you are issuing a regular invoice for things like rent, subscriptions or where you regularly supply goods or services. You can also use it for payments in instalments. This can make purchases much more attractive to your customers. It means you can offer payments in in a set number of regular instalments – rather than in one, up front, fee.
But a word of warning – your customer has the right to cancel the payment even after it is made and even if you don’t agree. So it is best to not use direct debit for really big transactions that might leave you badly exposed.
How does it work?
You have to get permission by getting your customer to fill out a Direct Debit Form. You have to provide notice before you take payment (but the customer doesn’t need to do anything). In other words, you still need to issue an invoice before payment can be taken. Then, when the due date rolls around, payment is actually taken out of the customer;’s bank account. It takes around five working days for the payment to appear in your account.
The direct debit provider you choose can usually provide you with a sample direct debit form.
How do I set it up?
Setting it up is free but there is usually a fee charged for each transaction. The fee varies so shop around. You can set it up with your bank but for small business it’s probably easier to do it through a dedicated direct debit provider.
There are a number of established and reliable direct debit providers. Shop around because the price can vary. They can also help with things like the direct debit form, procedures and advice. If you are using online “cloud” accounting service – you might want to check that your direct debit service can integrate with it. That way you can reconcile payments your payments with your online accounting software.
To give you an idea, the online accounting software Xero (Wealthpath Accountants is a Bronze Partner of Xero) can integrate with popular providers like GoCardless, IntegraPay and Ezidebit which makes bookkeeping much easier.
- You can actually set it up via your accounting software – which is very convenient!
- Setting up the payments themselves is easy in XERO and other accounting packages.
- The software will automatically invoice your customer before money is taken.
- You can manage everything in the one place.
But most other “cloud” accounting software packages will integrate pretty seamlessly with direct debit providers too.
It saves you time and money
Which actually raises an important advantage with direct debit. It slashes the amount of time you need to devote to invoicing and the administration around it. Time, as they say, is money. Direct debiting note only makes payment much surer it lowers your costs as well.
Wealthpath Accountants offer a “no obligation” consultation where we can outline how we can help your business to grow and thrive. Call us on: 1300 268 800.