Should My Company Use a Direct Debit or Standing Order?

May 31, 2019

A direct debit and standing order are two different methods of taking payments automatically. In this post we will consider the main differences between them both and which method you should be adopting for your business.

Direct debits and standing orders two kinds of automatic payments. In this blog post we look at the difference between the two and ask which is better for businesses and their customers.

A Bacs specialist, Interbacs was established to manage this area of business payments. Our team has more than 25 years of experience in the sector. And one thing that experience has taught is that automatic payments can be tricky for people that are new to the process.

In this blog post, we aim to demystify standing orders and direct debits and help you work out which type of payment suits the needs of your business and your customers the best.

The difference between a standing order and a direct debit comes down to one fundamental distinction – who has the authority to make the payment.

With a Standing Order, a customer will instruct their bank to make a fixed payment on a regular basis – weekly, monthly or annually.

With a direct debit on the other hand, a customer grants a firm the authority to take a payment out of the bank account.

In other words, a business has more control with a direct debit and the customer has more control with a standing order.  

What’s better for businesses?

It’s easy to see why this increased level of control makes direct debits more appealing for businesses.

While standing orders have been an important part of the automated payments landscape. The use of standing orders is starting to fall.

From the perspective of a business, direct debits offer better flexibility, security, and control over your finance… and therefore cash flow.  And if you’re running your own business that, of course, is key.  Direct debits are an electronic – and therefore paperless – solution to your business payments, with detailed reports available online. 

The control also comes from the fact that you, as supplier, establish the payment.  Moving forward, Direct Debit supports both fixed and variable collections from your customers, so that if you find you do need to amend the payment amount, the power is with you to do that, and there is no need to seek the customer’s approval.

Here’s one example.  Say, for instance, the UK’s withdrawal from the EU necessitates a further tax levy to be added to your billing. 

With Standing Orders in place for payments, you would have to contact each of your customers and ask them, individually, to cancel their current Standing Order with their bank (who, as above, have the authority to make the payment) and ask that the bank establishes a new one, at the new amount.  Well, we are all busy:  You are busy … your customers are busy and they will not look kindly on that level of admin, and another thing to add to their to do list.  They may, in fact, use the disruption as a chance to review their relationship with you completely – if they’re going to have to set up a new payment, maybe this provides the window of opportunity for them to set up with someone else?

Out of sight, out of mind.  How much more effortless, then – with a Direct Debit – for you to simply amend the amount your end, for all your customers, via your business banking, or even more smoothly via your Interbacs automated payment software solution.

Once upon a time, customers may have been more mistrustful of suppliers, in their eyes, taking whatever they want out of their accounts. But as the technology has become more mainstream, in general, people are more willing to subscribe to this kind of automatic payment arrangement.

Want to learn more about automatic payment management? Speak to a member of our accounts team today. Call: 08444 127 180.

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I don't recognise this payment! How do I cancel my Direct Debit? How do I get my money back?

A direct debit and standing order are two different methods of taking payments automatically. In this post we will consider the main differences between them both and which method you should be adopting for your business.

Firstly you have to consider the setup of Direct Debit, can you afford it? Is it worth your time and effort? Will it actually benefit my business? The simple answer to this would be, yes!

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