In the ever-evolving digital age, it may feel like your IT business has competition on every corner. Attracting clients is one challenge, retaining them is another.
You want them to sign up and stick around for the long haul.
Offering exemplary service is top of the list here, whether you offer web hosting, IT support or both. But don’t forget to look at the whole package: how you’re paid can make all the difference not just to your bottom line but to the size of your client database.
Here we explore how partnering with a bureau and keeping track of the timings of Direct Debits payments efficiently can turn customers into loyal brand advocates.
The Ins and Outs of Direct Debit Timings
If you’ve decided to accept payment via Direct Debit, it’s wise to understand the Direct Debit rules. Knowledge of how the system works will ensure you can make the most of its numerous benefits and deliver the best service to your clients. If they call with a question, you and your team will have the answers.
Direct Debits are managed by Bacs, the organisation responsible for processing billions of transactions each year. These payments are fully automated to simplify moving money from one account to another on a regular basis.
Direct Debit payments are different to card transactions as they don’t lead to an instant payment. Instead, they take at least three working days to clear and usually require advance notice to be given to the payer.
Getting to grips with these timings will ensure your team is equipped for any client queries about how and when they’ll be paying you. Friendly, informative customer service that will satisfy and reassure.
Giving Advance Notice
For almost all Direct Debit transactions, your client must be notified in advance before your bureau submits a payment to Bacs. This period of time is, by default, 10 days, although this can easily be reduced if agreed with both your customer and your bank. Once notice has been given, it will cover all future payments provided that the terms remain unchanged.
The only exceptions to giving advance notice are if a client authorises a one-off payment to be taken immediately, or when they’ve agreed to a fixed payment schedule. For example, they’ll pay you £XX per month for web hosting on the 1st of every month.
If you fail to give advance notice, your customer is covered by the Direct Debit Guarantee and is entitled to claim the money back.
How Long Do Bacs Payments Take?
With FastPay on board, you can relax in the knowledge that they will manage the submission of payment to Bacs. They can accept your payment requests up to 30 days before the collection date and will submit them on receipt.
After this stage, each transaction is processed using the Bacs three-day cycle, an important part of the Direct Debit rules.
The three-day cycle dictates when each stage of the process takes place and what action needs to be taken by the parties involved. It applies to collecting payments, setting up new Direct Debit Instructions and for flagging any failed payments.
Working Day 0
This is submission day when a payment request, in the form of a message, is submitted to Bacs by your bureau. If this is received before 10.30pm, Bacs will issue this request to all the relevant parties overnight.
Working Day 1
This is processing day when, having received the message at 6am, the relevant parties prepare to take action. Your client’s bank, for example, will be poised to debit their account of your monthly fee.
Working Day 2
This is the day for action when money changes hands and all parties take the required steps. For example, your client’s account is debited and your account is credited. Cycle complete, your invoice has been paid automatically with minimum administrative input from you and your client.
This simple cycle only applies when a Direct Debit mandate, the agreement between your business and your client, is already in place on day zero. In this instance, collection takes place on day two.
If it isn’t, the cycle is slightly longer to account for the time needed to set up a new mandate, either online, on the phone or on paper. This can be approved on day two and the amount collected on day four.
Keep in mind that a tiny percentage of Direct Debit payments fail and that none are considered 100% confirmed until either day four (when using an existing mandate) or day six (when setting up a new mandate). If at this stage, you don’t receive a failure notice, you can be assured that the transaction has been successful. Your cashflow is established for another month.
And also be aware that the 1% of overall payments which fail will still be credited to the receiving account on day two. If your client’s bank subsequently refuses to approve it, for example if the account is overdrawn, they’ll notify your bank to get the payment reversed.
These notifications, which are sent via a second Bacs three-day cycle, will be brought to your attention swiftly by FastPay through regular reports so you can take immediate, professional action to resolve the issue.
The three-day cycle only operates on days specified by Bacs on their processing calendar. No submissions can be made on non-working days and the banks won’t process any messages.
How Direct Debit Encourages Customer Loyalty
Now you know the answer to the question “How long do Bacs payments take?”, how will the efficiency of this process affect your business and your clients?
Put simply, Direct Debit is the ultimate fast track to financial flexibility, reliability and security. It brings immeasurable benefits to every corner of your business including boosting your odds of keeping clients happy and loyal.
If you’re relying on outdated payment methods to collect regular fees, such as Standing Orders or credit cards, your customers could be turned off.
Inflexibility isn’t an option here. Your clients are already embracing tech and need your professional support to keep their set-up working at optimum levels. It’s crucial that how they pay you is equally as technologically efficient.
Direct Debit ticks all the boxes here. Offer it as a payment option – and even the only payment option – to encourage loyalty and prevent them doing a quick online search to find your competitors: the ones that do accept Direct Debit payments.
Join the Direct Debit brigade, as hundreds of thousands of businesses already have, and your clients will be reassured that the IT services supplier they’ve chosen is professional, personal and wants to make their life easier.
This trust will then extend throughout the rest of your business: they’ll trust you to take your monthly charges from their account at the right time, they’ll trust you to inform them of any price increases and they’ll trust your technical expertise to do an exceptional job.
And when it comes to re-assessing their supplier list, they’ll be more likely to stay loyal to you and your brand. Here’s how:
- Peace of mind: clients know when their account will be debited and by how much. They’re reassured that they’ve paid you and that your service will remain uninterrupted.
- Reduced admin: clients no longer have to write a cheque, manage a Standing Order or give you a call to pay by credit card. Direct Debit and your bureau does all the work for them, relieving them of one more item on their long to-do list.
- Reassurance: FastPay offers a fully-branded service meaning that your business name, not theirs, will appear on clients’ bank statements. This reassures them that they’ve paid the right amount to the right supplier, as well as reinforcing your brand.
- Security: the Direct Debit Guarantee offers clients unbeatable levels of security, protecting them with a comprehensive range of safeguards. Their mind will be at rest knowing that the Direct Debit rules make it the most secure form of payment available.
- Flexibility: clients can choose the date that your monthly fee leaves their account, giving them control over their cashflow and the ability to prioritise your payment within their budgeting.
- Lower fees: because Direct Debit will save your business money through reduced admin time, you could offer a client discount to further encourage loyalty. This kind of incentive to adopt a more flexible payment plan is guaranteed to score you major customer satisfaction points.
Knowing the intricacies of the Direct Debit rules, alongside offering it as a flexible, secure and convenient payment option, will give your IT business a competitive edge. You’re not only operating a scheme with your bureau, you also understand it.