As a small business owner, it is possible that you are having a hard time managing your payments. One alternative to doing it yourself is hiring a direct debit service to do it for you. They collect payments from your clients and pass them on to your bank on your behalf. You in turn pay them a small fee for their troubles. Direct debit comes with many advantages including the fact that they free you up for other things, they organize your cash flow and they are also secure. Here are some frequently asked questions about direct debits.
What is the difference between a direct debit and a standing order?
Many people are confused by these two terms. You shouldn’t be. A direct debit is an instruction to a company to take money from your bank account to pay a creditor. A standing order, on the other hand, is an instruction to a bank to take money out of your bank and pay it to a creditor.
Why choose direct debit?
We have already mentioned some of the benefits of direct debits such as convenience. In addition to that, direct debits will help you save money I n the form of discounts – utility providers, for instance, usually give discounts to clients who pay using direct debits. In addition to that, should the bank pay more than they ought to they will refund you.
Are there any disadvantages?
There is one main disadvantage with direct debits – anyone who pays bills using direct money has to make sure that there is money in the account when direct debits are due. In other words, you have to watch your account closely at certain times of the month.
Who is allowed to use direct debits?
They are usually for people whop have a current account but some banks allow people who have basic accounts to use them. In addition to that, some credit cards and credit unions allow them. As for age, there are some banks that allow them to people over 18 while others allow them for people over 16.
How easy is it to set up a direct debit?
The companies have made it very easy these days to set up a direct debit account. All you need to do is go online and fill a form. The company will then send the instructions to your bank.
Do they cost me anything?
Yes, the direct debit company will charge you a small fee for processing your payment but your bank will not. That said, if you don’t have enough money to cover the direct debit you bank can penalize you.
What if I have a problem?
The great thing with direct debits is that should the bank over-pay, they refund you.