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Setting up direct debit
Setting Up Direct Debit
Most people have never really thought through the process that it takes to set up a direct debit payment system. And really, that is a good thing, because the process is an incredibly boring one. Like any good system, an efficient payment system is neither sexy nor exciting at any time – at least, not until people start to realize how well it works, and how easy it is to use on a consistent basis. A reputable direct debit provider has the ability to automate one of the most important parts of your business, and to essentially facilitate the entire operation of your business.
The flow of cash into (and unfortunately, out of) your business is absolutely critical to your continued success. Obviously, without cash you will not last very long in any sort of endeavor. And having the ability to collect the cash you rightly deserve from your clients is of critical importance to being able to stay in business once your initial money runs out. And while the process of instituting a direct debit payment system into your method of operation does take some initial effort, it pays dividends (almost literally) with its simplicity from that point onward.
And the ability to simply direct debit from your clients can allow you to expand outward in ways you might never have even thought possible. The process is a fairly straight forward one, and it goes as follow.
First, you need to find a direct debit provider who will allow you to set up the direct debits. Once you are satisfied with the level of fees that a particular direct debit provider charges, you can simply sign up with them and register your business. From there, it becomes a matter of your clients.
Now, you can never direct debit from a client’s bank account without their consent. So as you negotiate your rates, you agree with and sign an agreement with your client, which will allow you (through a direct debit provider like PaymentHub) to directly debit what you are owed from their account. And from that point onward becomes automatic.
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Tip #13 – Using PaymentHub Notes
Do you remember why you altered a payment schedule? Or why you added a catch-up payment? PaymentHub notes is a fantastic way to add relevant information to why you have made a change in the payment system. Best of all, it is a free add-on to the PaymentHub Direct Debit system.
To add a note, simply click on your customer’s name. This will take you to the “Customer Home” page. In the notes section of the page, click new. Give your note a relevant title, add a category for future reference and write your note.
Notes are proving very popular for our clients with large staff. When you add a note it is automatically date and time-stamped. Everyone in your team can see when the note was added, making your customer interactions quicker and easier.
Got a great PaymentHub tip? Send it to our support team support (at) paymenthub.com.au and we will include it in a future newsletter.
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PaymentHub Direct Debit Case Study – Security and Monitoring Services
Direct Debit Case Study
We have recently partnered with several security and monitoring companies to help them manage their cash flow. The entire process has been very enlightening.
Like most of our clients, these businesses have an ongoing, service based relationship with their clients. They actively monitor the security alarms in houses and commercial properties and where required, run patrols and respond to these alarms. They also invoice their clients every month.
Over the past 12 months, these companies have carried 50-100k worth of debtors past the due date of their invoices… sometimes until the next month’s billing cycle. Our brief was simple, implement a system which would reduce the number outstanding debtors. Below are the steps we took to help our client:
- We sent a letter to our client’s customers informing them that we were going to implement a new billing system to reduce the company’s administration (and thus keep their monitoring fees low)
- We also sent a direct debit authority so we could begin billing the following month (none of our clients mandated direct debit as a payment option – they left it up to their clients to decide how they would pay)
- We set up email reminders (and SMS reminders where suitable) to tell people when they would be debited.
- We continued to send letters to those who had not yet signed up for the direct debit payment option with testimonials from others who had (generally convenience was the most common reason for people opting to switch to direct debit)
Within 3 months, we have 40% of our clients’ customers using direct debit as their preferred payment method. We have halved the overdue debtor list and now all new clients are put straight on direct debit.
This approach has allowed our clients to:
- Improve their cashflow – they now can predict with a high degree of accuracy how much money will be in their account at the end of the month
- Reduce their admin overhead – there is no more reconciliation of cheque and EFT payments. We have reduced the number of calls that need to be made chasing up outstanding payments.
- Focus on improving their own systems – the admin staff now have more time to work on streamlining other areas of the business now that a large number of payments are being taken care of.
What are you doing to improve your business? What can be automated to let you focus on providing your customer with the best service you can?
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Customer Relationships – what are “terms of trade?”
There are many small business transactions carried out daily without a piece of paper being signed. These are small exchanges where the goods or services are provided and payment is made at the same time. In most cases, these transactions pass without event. There may be instances where the product has a fault or the consumer believes the product does not meet its advertised standard. The Trade Practices Act provides the legislative tool to manage these instances when they arise.
At PaymentHub, most of our clientele are either providing a service at a discounted price in return for the consumer guaranteeing their custom for an extended period of time (for example a gym membership) or alternatively they have provided a physical product and are collecting payment for this product over time (for instance a coffee machine). These long term customer relationships, while also covered by the Trade Practices Act, generally involve some form of contract or terms of trade.
What are terms of trade you might ask? It is simply a contract between you and your customer which sets out the rules for the purchase of the goods or services. It spells out the obligations of each party in the transaction and makes it clear what the implications are if these obligations are not met. We regularly come across businesses that do not have this fundamental document when trading. The most common reasons we hear for not having these documents in place are:
- “I don’t want to pay a lawyer to develop my contracts”
- “I don’t need them because I am on friendly terms with my customer”
- “It is too much paperwork for me and my customers”
While some people feel uncomfortable getting contracts signed, they are essential should the relationship between two parties deteriorate. This may be due to a customer paying late or the standards of the product or service dropping. In either instance, a contract can provide the basis for moving the relationship back onto a positive footing.
An example of this is, many small businesses expect to be paid within 30 days. When you notice a client beginning to become a little tardy with their payments, pointing them back to the clauses within your contract can be a simple way to get things back on track. It does not have to be used as a big stick, but people are sometimes forgetful and paying your invoice may fall somewhat down their priority list. If your friendly reminders do not get you anywhere, then it may be necessary to refer to the contract.
Remember – speak to your lawyer. These standard terms and conditions can be written for under $2,000 and are a valuable part of your business.
Does your business have terms of trade? How do you use them?
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PaymentHub Tip #12
Are you having difficulty contacting a client? Why not send them an SMS straight from your PaymentHub system. Select the customer you would like to message, go to the SMS section of the customer page and click “New”. Type your message and click send.
Best of all, you will have a record of the SMS on your PaymentHub System.
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Direct debit case study – Lay-by system for Peats Ridge Festival
PaymentHub has partnered with Peats Ridge Festival to deliver a lay-by ticketing program for festival goers.
This solution has been implemented over the past six months, with the obvious benefit to music lovers of being able to pay their tickets off over a period of time.
The project has been a great example of how direct debit can be used to make a product more affordable. While there have been a few hiccups along the way, the feedback from ticket holders has been extremely positive. During our dealings with festival goers, we have been told numerous times that the direct debit payment plans offered through PaymentHub provided an affordable way for them to attend the festival.
The lay-by system worked as follows:
- Working with Peats Ridge Festival, we determined what the payment plans would look like, the frequency clients would be billed and a maximum number of payments
- Festival goers would sign up on a PaymentHub direct debit plan that suited their requirements
- We wanted to make sure that the ticket buyers knew when the funds would be debited from their account so we issued both SMS and email reminders about upcoming payments
- On completion of the payment plan, Peats would issue the tickets
A really simple approach that delivered positive benefits to both Peats Ridge Festival organisers and their clients!
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Building a membership business (Part 1)
As specialists in recurring payments, it is often that subscription-based services or clubs (perhaps even yours!) have the greatest need for our products. We refer to these clients as membership businesses and while they operate in a broad variety of fields and service different demographics, at PaymentHub we have observed that successful membership businesses share a common set of qualities.
Membership businesses are generally built around the following concepts:
- There is a common purpose or interest bringing a group of people (for example sailing, breeding canaries, sport or reading)
- Members are willing to pay an ongoing fee to be part of this group
- Members are provided with some material that identifies them as part of the group (for example a shirt, badge, certificate or piece of equipment).
We’ve been fortunate to speak to a number of successful membership organisations over the past five years and the list below describes the key activities they’ve undertaken to build their memberships from one member to thriving communities.
1. Identify the key common needs of the group and go out of your way to deliver on those needs.
Successful membership organisations are not built over night, but the fundamental element of any successful organisation or club is that they have identified the key, common need of the membership base and they deliver on it. Remember people don’t have to be part of your club, so unless you are delivering on that thing that made them become a member in the first place – they will leave.
2. Provide a group identity
This is important whether you are a football group or a member of an exclusive club. Members like to be recognised by other members and other people who share their interest. A strong form of membership identity whether it be clothing (an AFL club), a membership card (a golf club) or some other trinket that provides an identity for the club or membership organisation (for instance BNI provides a badge and business card holder) is a common element in all the successful membership organisations we have observed.
3. Reduce the barriers to entry
The goal of most (and I use the word most rather than all) membership organisations is to grow their membership base. Quite simply, the more members a club has, the greater its resources to fulfill the common needs of the group. Make it easy to sign up for club, collect an ongoing subscription fee rather than a large upfront fee and reduce the time taken to process an application.
What strategies have you implemented, what worked and what didn’t? We will add to this list of the upcoming months and would love to hear your thoughts on growing a membership business or club.
Also if you have any questions about PaymentHub and how our direct debit and billing solutions can assist your club, please do not hesitate to contact us.
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Direct debit companies case study – Lay-by system for Peats Ridge Festival
Over the past 6 months we have partnered with Peats Ridge Festival to deliver a lay-by ticketing programme for festival goers to pay off their tickets. This has been a great example of how direct debit can be used to make a product more affordable. While there have been a few hiccups along the way, the feedback from ticket holders has been extremely positive. During our dealings with festival goers, we have been told numerous times that the direct debit payment plans offered through PaymentHub provided an affordable way for them to attend the festival.
The lay-by system worked as follows:
- Working with Peats Ridge Festival, we determined what the payment plans would look like, the frequency clients would be billed and a maximum number of payments
- Festival goers would sign up on a PaymentHub direct debit plan that suited their requirements
- We wanted to make sure that the ticket buyers knew when the funds would be debited from their account so we issued both SMS and email reminders about upcoming payments
- On completion of the payment plan, Peats would issue the tickets
A really simple approach that delivered positive benefits to both Peats Ridge Festival organisers and their clients!
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PaymentHub Tip #11 – Skip payments in a payment schedule
Most of you using PaymentHub do so to automatically collect your payments, but what if you need to skip a payment? We have made it as easy as 1, 2, 3…..
- Go to the customer’s home page
- Click on the payment schedule
- Click the update button next to the payment you want to skip and click change!
It is that easy. You can forget about it after that and the payment schedule will start again when you want it to.
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Direct Debit Pitfalls
Direct Debit Pitfalls
While it may seem strange for a payment company to spell out the risks of direct debit, we believe it important to provide a balanced view of some of the difficulties that can arise. By understanding some of these issues, your business will be able to better navigate the traps of what is otherwise an excellent method for collecting your regular payments.
The first and most obvious issue with direct debit is that the account you are attempting to debit may have insufficient funds. This is logical given direct debit is a biller initiated transaction; it is not possible to know whether sufficient funds exist prior to debiting the account. Not only does a default require some action from you, it can also mean your customer has incurred a fee from their financial institution.
As a business there are several things you can do to reduce this risk, but they all essentially relate to communicating with your client:
- Ensure it is clear in the contract when payments will be debited
and then provide a copy of that agreement to your client for their
future reference, - Send reminder messages to your client when a payment is about to be debited,
- Provide adequate notification of any changes to your direct debit clients, especially around public holidays when funds may not have been debited on the normal day the customer would have expected, and
- Align the payment date with your customers’ paydays.
Now, there are several businesses that will manage customer defaults on your behalf by sending letters and calling your customer, but the easiest (and most inexpensive option) to avoid defaults is to keep the communication channels between you and your clients open. Remember, your customer relationship is the most important commodity to your business, manage that relationship well and you will not only reduce your defaults, you can avoid employing a 3rd party to manage your customer relationship.
One of the other drawbacks of direct debit is the payment or payments are contestable. A customer can contact their bank and contest a payment on the grounds that (a) there is no authority to debit the account or (b) the transactions were not authorised (this could be the amount was not correct or there was a payment double up). When this occurs the bank will request a copy of the signed direct debit authority, as well as any other supporting documentation. The most common issues experienced by our customers are:
- The customer has used their spouse’s account to make the payments
without obtaining the spouse’s signature on the form. Remember, it is
the account holder’s signature that is required authorise a direct
debit, - The account details have changed and the business has not obtained a new authority for the new account details. By re-issuing the direct debit request form with the new account details, you are protecting business from having funds reversed from your account
- The biller is posting a reference to the customer’s bank statement that does not make sense to the customer. Remember, your customer identifies money withdrawn from their account by reference on their statement, not the amount. Keep the reference on the statement simple and relevant to your trading name or industry.
In the upcoming weeks, we will look at some other pitfalls of direct debit.
- Ensure it is clear in the contract when payments will be debited
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- You Get Paid Faster, Keep Customers Longer:You pay a single fee per transaction. No hidden surprises. No set-up fee, monthly fees, or annual fees for our direct debit service. No lock in contracts and importantly, no default fees if your client misses a payment.
- You Get More Flexibility: Every business is individual. PaymentHub direct debit allows you to create the billing options and payment schedules that suit your business.
- You Save Time: No need to call us to make changes to your clients. You can do it all in minutes. Our simple and easy-to-use interface allows you to add and remove clients and change payment schedules and amounts.
- You Get More Help Getting Started: We're the only direct debit company that truly 'gets' the competitive edge you can gain from PaymentHub and we will help you set-up and get running quickly.
- You Get More Support: You know your business, we know direct debit. When you're busy with your business and need help along the way, we will help you.
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