I currently have some clients paying by standing order however this morning I was contacted by a company offering a direct debit facility.
I like the idea of dds but the upfront costs seem a bit high, and also there are collection fees to take into account. Money is tight so I don't want to commit myself without considering the pro's and con's.
Does anyone on here allow their clients to pay their fees by direct debit?
I currently use standing order, which is a pain when the VAT rate changes, and enquired with my bank about DD, but was told that it was only available for businesses with £1m+ turnover.
Was just wondering why you prefer dd to standing order?
I appreciate that for people (like Nick) who are VAT registered, it makes it easier when the VAT rate changes, but that doesn't happen all that often (although I appreciate it may feel like it to those so affected!!)
Having spent many years working for a bank, I know that a surprising number of people still refuse to use DD's - and I suspect the number would be even higher if the dd was actually going to a different company to the one they owe the money to, which is how I assume the company that contacted you work.
Thanks for the input. I was quoted £950+VAT as a set-up fee (non-bank supplier) and a 2.5% commission fee on every transaction. No minimum turnover.
If it wasn't so expensive I'd be really keen as I like the flexilbility of dd's compared to so's. Agree with you gbm that it would have been very handy when the VAT rate changed!
Think I will stick to so's unless the cost comes down or cash flow improves (which I was hoping the dds would help with).
Was just wondering why you prefer dd to standing order?
I appreciate that for people (like Nick) who are VAT registered, it makes it easier when the VAT rate changes, but that doesn't happen all that often (although I appreciate it may feel like it to those so affected!!)
Having spent many years working for a bank, I know that a surprising number of people still refuse to use DD's - and I suspect the number would be even higher if the dd was actually going to a different company to the one they owe the money to, which is how I assume the company that contacted you work.
Helen
Hi Helen,
It's mainly due to the flexibility of direct debits that I like. When the client signs up for a dd I belive they sign an agreement whereby I can increase/decrease fees as I go along, without the client having to get involved. Obviously the client gets prior warning of any changes.
I'm part of a franchise network and there are a few other franchisees who use DD's, and they've found it useful for controling cash flow, although standing orders also help with this.
I do agree with you though that DDs aren't for all clients so it wouldn't suit everyone.
The firm I am working for uses Direct Debit to collect some of their clients fees. When I started they exlpained that the reason they prefer to collect this way instead of cheque or Standing Order was because each year they review all of their clients fees and increase them in line with inflation.
My undertsanding was that Standing Orders made this a admin nightmare and that Direct Debits could deal with it much better. I don't complete the admin but can see why , as each Standing Odrer would need to be resigned each year by every client.
Just to clarify - the client has to agree to any changes, otherwise they can claim under the direct debit indemnity scheme for full refund. It is undoubtedly easier for amending payments, which is precisely why all the utility companies like them, and also precisely why so many customers don't like them!!
I would have thought that from a cash flow point of view it would be far easier to get clients to sign standing order mandates then go to the expense of setting up for direct debit user ability.
