How to set your business up for Direct Debit

Direct Debit is the most popular method of collecting recurring payments like memberships and subscriptions. There are a number of things to consider before you start your Direct Debit collection journey.

Getting your business started on Direct Debit

There are two primary ways you can setup and manage your Direct Debit collection process.

  1. Manage your own Direct Debits – apply to be a part of the Direct Debit scheme through a sponsor bank
  2. Use a Direct Debit bureau

In order to be accepted onto the Direct Debit scheme through a sponsor bank, you must obtain a Service User Number (SUN). This is a six-digit reference that is unique to your business. Not all businesses are eligible for a SUN. If this is the case for you or you just want to save the hassle of getting a SN, you may want to think about employing the services of a Direct Debit bureau.

A Direct Debit bureau’s job is to take over the management of your Direct Debit process to boost sales, improve collection rates and drive customer retention. Most Direct Debit bureaus have their own SUN that can be used for their clients. Find out if you are eligible for a SUN here.

1. Managing your own Direct Debits

Managing the Direct Debit process is a full-time job. Handled correctly, you will see acquisition and retention rates soar, but it’s important to make sure you have the correct systems, processes and people in place.

The Direct Debit Scheme Rules

A 160-page document, the Direct Debit Scheme Rules outlines how to remain fully compliant. Arguably, the most important part of this is the Direct Debit Guarantee – the section that safeguards customers from fraud or payments made in error.

The Direct Debit scheme rules get updated roughly every two to three years, and it is important that your staff remain in the loop through regular training.

Get Bacs Approved Software in place

This is software for submitting Direct Debit payments that meet the quality and security standards expected by Bacs. You will need to send CSV files to Bacs on each billing period and it is usually easier if you automate this process.

Learn the lingo

Bacs will notify you of successful and failed payments after each billing period. However, they do this through a series of codes, broken down in the following reports: AUDDIS, ADDACS (Automatic Direct Debit Amendment and Cancellation Service) and ARUDD (Automatic Return of Unpaid Direct Debits).

For the full list of Direct Debit codes, click here.

Have a credit control process in place

One of the most challenging parts of Direct Debit collection is managing customer loyalty when a payment defaults. Payment failures are embarrassing and stressful for many customers, so they must be handled sensitively.

Your first job is to try and prevent failures from occurring. Sending regular SMS updates on top of any advance notice will give people time to get their finances together. When a payment does default, then you will want to make it as painless as possible for your customers. Platforms, such as DFC’s, allow customers to amend their payments online, saving them an uncomfortable phone conversation.

Paperless or not?

If you decide to offer paperless joining, i.e. online or over the phone – also known as Electronic File Transfer, then there are several steps you need to take to get this set up.

1. Get live AUDDIS (Automated Direct Debit Instruction Service) status

Complete an AUDDIS and paperless Direct Debit application form through your bank. You must meet a set standard for your application to be signed off.

2. Ensure that system amendments for AUDDIS incorporate Paperless Direct Debit requirements

Prepare an AUDDIS migration plan if applicable.

3. Send paperless Direct Debit material to your bank for approval:

This includes scripts, confirmation letters, internet screen and any material that has been used in the setup of your paperless Direct Debit process. Any subsequent changes to documentation or scripts must be approved by your bank prior to use.

For more information on setting up paperless Direct Debits, click here.

2. Using a Direct Debit bureau

Using a Direct Debit bureau is often the favoured approach because it takes the pressure off businesses and enables them to get the most out of Direct Debit. Every Direct Debit bureau operates in a different way, but the below offers a general snapshot into the sort of benefits you can expect:

In-house teams are freed up to focus on growing other parts of business
Profit and reputation is improved through retention-driven payment strategies
Bureaus generally offer state-of-the-art technology, such as online joining
Some bureaus have customer service teams in place to handle customer enquiries
Credit control is skilfully handled, and collection rates increased

If you decided to work with a Direct Debit bureau, then you will need to take the following steps

1. Find a bureau that meets your needs

Many Direct Debit bureaus work with particular industries. Here at DFC, we’re a leading provider in the health and fitness industry but we also work closely within the childcare, hospitality and spa industries.

2. Decide if you want to use your SUN or theirs

There is no real benefit to using your own over your Direct Debit bureau, but you will save on the application process if you decide to use theirs.

3. Determine if they can integrate with your CRM

Streamlining your payment process so that all payment and member data goes into your CRM, from acquisition through to billing and reporting, is crucial.

4. Choose whether you want to offer paperless joining

Some Direct Debit bureaus offer their own paperless joining solutions. But not all. If this is something you’re interested in, then make sure this is something they offer.

5. Decide on a deadline

Getting set up takes time. How long that is will depend on whether you’ve decided on pricing packages, billing frequencies and how easy it is to integrate with your systems and processes. A good Direct Debit bureau will be able to work with you to determine a solution that works best for your business.

About DFC

At DFC, we offer a full service approach to collecting Direct Debit membership payments for gyms, leisure centres and other health & fitness operators.

We are focused on making running your business easier. Reducing time spent on admin work, and helping you take control of your entire member journey to increase retention and revenue.

DFC is brought to you by Xplor, the first global platform integrating software, payments, and commerce-enabling services to help businesses thrive.

Click here to get in touch today to find out how we can help your business.

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