How to Take Payments by Direct Debit

Written by Andy Pearson

Direct Debits are often the favoured method for organisations looking to take payments from their customers. A Direct Debit mandate facilitates fast and flexible payment collection with minimal hassle or admin. 

Traditionally, Direct Debit mandates needed to be set up in person or via a paper form. But it’s now very easy to set up a Direct Debit mandate online in just a couple of minutes.

This article explains what you need to know to be able to take payments via Direct Debit.

Give the Customer Advance Notice

Once a customer has authorised a Direct Debit mandate, you’ll need to provide them with advance notice of payment amounts and schedules. This is one of the features of the Direct Debit Guarantee, which we’ll come on to later. Advance notice protects your business and the customer, ensuring transparency and setting expectations before any money is taken. 

Usually, this notice needs to be given 7-10 working days before a payment is due.

What to Include in an advance notice 

When giving notice of a Direct Debit payment, you should include the following:

  • The amount to be taken
  • The date of the payment
  • The payment schedule and frequency
  • The vendor name and contact information
  • Direct Debit reference
  • Advance notice period (for initial notices only).

It’s important to understand advance notice, as giving it incorrectly entitles a customer to an immediate refund of their Direct Debit under the Direct Debit Guarantee.

Submit Payment Requests Through BACS

What is BACS?

BACs stands for Bankers’ Automated Clearing System and refers to a bank-to-bank payment transfer system used by banks in the UK. All Direct Debits are facilitated through BACS, which is one of the reasons they’re so popular as you can be sure the payment is secure and legitimate. The universal adoption of BACS makes it the most cost-effective way of collecting payments from customers.

As submissions are handled by BACS automatically, there’s nothing manual for you to do; on the date of payment, your bank simply credits your account while the customer’s bank debits theirs. 

The BACS Three-Day Cycle

Once requested, Direct Debit payments often follow the BACS three-day cycle. The cycle starts when a payment is submitted to BACS (between 7am and 10:30pm), and is forwarded to the customer and vendor bank accounts at that point.

On day two of the cycle, the banks get ready to respond to the request. The customer bank prepares to debit the account, while your bank simultaneously prepares to credit yours. 

The transaction takes place on day 3. If payment is successful, there’s no further action to take. However, if a customer bank flags the payment as an error, the payment will not be completed.

What Happens if a Direct Debit Payment Fails?

As BACS payments are the industry standard for automatic payments, they very rarely fail so this is a question that won’t often need to be asked. 

However, if this does happen, usually because a bank believes a payment has been taken fraudulently or in error, then a customer is entitled to an immediate refund. Such requests for refunds are known as indemnity claims, and a customer’s right to them is a core part of the Direct Debit Guarantee. 

What is the Direct Debit Guarantee?

All organisations that accept Direct Debits are bound by the Direct Debit Guarantee (also known as the Direct Debit Indemnity). This scheme offers peace of mind to customers that funds won’t be taken without prior knowledge, in error, or fraudulently.

The three main protections offered by the guarantee are:

  1. Customers must be given Advance Notice of any changes to their payment amount, date or frequency, usually 7-10 working days before the payment is taken. 
  2. If a payment is taken in error or without advance notice, the customer is entitled to a full and immediate refund. 
  3. A customer is able to cancel a Direct Debit at any time by contacting their bank.

Easily Take Direct Debit Payments with White Fuse

White Fuse’s comprehensive Membership Management Software makes taking Direct Debit payments a breeze. Quickly invite contacts to complete a Direct Debit mandate, and let us handle the rest. Get in touch today to start benefiting from our efficient online payment tools.

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