Direct debit refers to the instruction given by customers to their bank or building society. It authorizes third parties to collect payments from their account when they are due. There are a number of benefits that businesses can enjoy through direct debit collection. Some of the prominent ones are:
Say goodbye to late payments
Direct debit puts the business in control because once they have been authorized, they can collect payments when they are due without requiring their customer to do anything else. This means that the business doesn’t need to chase their customers for payments because they will be made on time.
Another solid benefit of direct debit collection is that once it has been set up, the entire process is automated. This means that payments are taken automatically and tracked on a monthly basis, which reduces the time that’s needed for managing them.
It is cost-effective
When card networks are used for payments, they can cost anywhere between 3 and 5 percent per transaction. In contrast, direct debit is a lot cheaper as the cost is usually not more than 1% per transaction.
One more perk of direct debit collection is that it is quite flexible. It gives you the option of changing the frequency and amount of payments without requiring your customers to re-authorize you. This means that you can increase your prices and take variable amounts whenever you want, without any administrative issues.
Improve cash flow
A big issue with late payments is that they can have an impact on your cash flow. You don’t know when to expect your payments, which means it makes it difficult for you to purchase new stock or pay your own bills. Direct debit collection lets you know exactly when your payments will arrive so you can plan accordingly.