In today’s digital world, Direct Debit has become a common, easy method of payment that more and more businesses are using. With its many advantages, there’s several good reasons why your business should be using it too.
The following guide starts at the beginning to help you understand what Direct Debit is, how it works, and how you can start successfully using it as a payment solution for your business.
What is Direct Debit?
Direct debit is a financial transaction where an amount of money owed is directly deducted from a person’s bank account. In simple terms, you collect money directly from your customers bank account.
How does Direct Debit Benefit Customers and Businesses?
From a customer’s standpoint, one of the main benefits of Direct debit is that it enables them access to the products and services they want and pay for them via regular installments. This not only makes things more affordable, but leading companies provide customers instant access to the things they want.
From a business standpoint, Direct debit has many key benefits. It enables them to secure payment details from their customers upfront which helps eliminate missed payments. It also allows them to reevaluate how they sell their products and services and enables them to create affordable, flexible payment plans that weren’t possible beforehand. These affordable options can result in more customers, which increases cash flow. The automated debits also reduce operational costs, saving you lost time.
How Does Direct Debit Work? An Example
This following is a perfect example of a business that would greatly benefit from Direct Debit Payments.
A Gym owner sells Annual Gym Memberships for $500, and the payment is usually required in full, upfront. $500 is a decent chunk of money for most people, but by using direct debit we can make Annual Gym Memberships payable via weekly installments, making them $10 per week.
Setting it up is easy. Your customer agrees to the membership plan, then fills in a simple form called a Direct Debit request. Once complete, this authorises you to take payments from their bank account. When the weekly recurring payment is due, you notify the customer that you will be taking payment, and the money is automatically transferred from their account to yours. It’s that simple.
By offering customers more affordable plans, you’re far more likely to secure new members paying $10 per week for their membership as opposed to a handful that could afford $500 upfront.
Breaking up large upfront costs like these into smaller Direct Debit payments makes things much more affordable for your customers, for both products and services. In turn, it increases the chances of customers committing to a purchase, meaning you’ll earn more money and have a steady stream of cash flow coming into your business that you can rely on.
What Types of Businesses Use Direct Debit?
Direct debit is great for a wide range of businesses that offer products and services. That being said, there are certain products and services with recurring costs that are ideal candidates for Direct Debit. They are:
- Gym and Personal Trainers
- Hair, Makeup and Beauty Salons
- Storage Shed facilities
- Allied Health care
- General Business
If you’re a business that has regular clients, Direct Debit is also much more convenient than invoicing. As you secure payment details prior to work commencing, you won’t waste time chasing up clients for money owing to you, they’ll simply be direct debited upon completion of the work.
Direct Debit – Helping Businesses Change The Way They Operate
In the last 5-10 years, there’s been a huge shift in the way businesses operate. The days of paying exuberant amounts of money upfront for products and services is slowly dying. Customers have changed, they demand access now and want payment solutions tailored to their needs or they’ll go looking somewhere else.
The rise of companies offering access to their products and services via direct debit payments has increased dramatically. For services, there’s recurring subscription models for the likes of Netflix, Stan, Spotify, SaaS, car hire, fitness and beauty, and more.
For products, the list is endless. Most major retail brands are utilising a direct debit provider at the point of purchase. Some companies offer their customers up to 6 different payment options at the checkout, each with their own unique model. E.g. Pay it off over 6 weeks, pay it in 4 etc.
Regardless of the type of direct debit plan, the purchased products are sent straight away, giving customers instant access whilst they pay for it over time.
Key Benefits of Direct Debit for Your Business.
If you still need convincing that Direct Debit is a potential game changer for your business, we’ve listed the following key benefits.
1. Better Cash Flow
Get paid on time, every time, that’s the beauty of Direct Debit. Poor cash flow is one of the main reasons why small businesses fail. Having Direct debit set up makes your cash flow more predictable, enabling you to plan for future costs.
2. Affordability Leads to More Customers
It’s almost 2021 and things keep getting more expensive. Furthermore, customers have changed and demand easy access for products and services and want to pay for them the way they want.
One of the major reasons why direct debit is so popular is that it makes things more affordable. By breaking down large, upfront payments and spreading the costs over time, customers can access more of the products and services they want and pay them off over time.
3. Time Savings – Automatic Payments and Missed Payment Follow Ups
How much time have you spent creating invoices and chasing up clients for missed payments? It all adds up and can be one of the most tedious tasks for any business owner.
Direct Debit payments are automated, so you spend less time chasing customers. If on the odd chance that a Direct Debit payment fails, a provider like Transacty has a dedicated team of collection specialists. They’ll be notified and will contact the client on your behalf seeking immediate payment.
4. Business Insights – Reporting and Forecasting
Knowledge is power. Knowing how your business is performing is crucial to making educated decisions. A Direct Debit provider like Transacty does much more than just facilitate automated payments. Their powerful software provides detailed reports on the payment plans across your entire business.
See who has paid, how much is owing, review slow VS busy periods, which payment options are performing the best/vs which could be improved. The possibilities or Transacty’s software solution is endless.
Start Using Direct Debit Today.
As we’ve seen, Direct Debit provides numerous benefits to assist businesses in remaining competitive with today changing society. By choosing a reputable provider like Transacty, you’ll not only be able to create flexible direct debit plans to suit your business, you have access to their specialised collection teams along with powerful reporting software.
If you’d like to know how Transacty can help your business, give our friendly team a call today. Our business is to make your business succeed.