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How to Set Up Direct Debit for Small Business

Rob Keating
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Last editedJun 20233 min read

Waiting on payments from customers can be one of the biggest pain-points for any small business. However, it’s not all doom and gloom. There’s one simple change you can make to reduce the stresses of getting paid: Direct Debit.

Direct Debit for small business

Just like a personal Direct Debit for monthly bills, a small business Direct Debit set up works in much the same way, ensuring that payment will be made on a set date. Direct Debit removes the need for customers to view, approve, and action any invoices you send, so you don’t need to wait around for clients to authorize payment upon receipt of a new bill – the payment is made automatically.

Despite the obvious benefits of offering Direct Debit as a payment method, it has traditionally been difficult for small businesses to access and offer to customers.

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However, there are now a number of Direct Debit providers offering services for small businesses.

Why is it so difficult? There are numerous requirements for setting up Direct Debit that most small businesses will find arduous. Once approved, setting up Direct Debit as a payment option can be a complicated task.

GoCardless offers small businesses a quick and easy way to set up Direct Debit and offer it to customers in minutes. There are no setup or management fees and no mandatory commitment periods. Try GoCardless today.

Want all the benefits of Direct Debit but without all the hassle & expense of dealing with banks?

GoCardless does all the heavy lifting for you so you can collect payments on time every time with just a few clicks!

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Direct Debit or standing order?

Standing orders are regular payments set up by the customer. This puts the customer in control of their recurring payments. In contrast, Direct Debit is set up by businesses with the permission of the customer (who is protected by the Direct Debit guarantee). Unlike a standing order, Direct Debit guarantees that you get paid, although it’s worth noting that Direct Debit indemnity means customers maintain the right to cancel any payment and receive a refund.

You can find out more about the differences between standing orders and Direct Debit here.

When to use Direct Debit collection for small businesses

Direct Debit is used for regular and recurring payments, which makes it an excellent choice for a range of businesses, including:

  • Businesses that need to be invoiced regularly – The best Direct Debit for small business makes life easier for both the payor and the payee. If you have clients who need to be billed regularly, Direct Debit not only makes sure you get paid on-time, but it saves your customer from doing any additional admin, which is always appreciated.

  • Businesses offering payment in installments – If you offer goods or products that customers can purchase in installments, it’s in your interest to make sure they don’t fall behind on their payments. As a result, Direct Debit is the perfect payment option.

  • Subscription-based businesses – If you’re providing an ongoing subscription service, Direct Debit is a highly suitable payment method to prevent customer churn.

In certain locations and industries it's important to understand customer payment preferences, GoCardless conducted a study here to identify trends.

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Direct Debit services for small businesses

While it may seem like setting up regular payments from a customer’s bank account to your own is a relatively admin-heavy task, the process is simple:

  1. Acquire a Direct Debit mandate from your customer – Also known as a Direct Debit instruction or DDI, they can be made in paper, online, or over the phone (though this method eliminates any paper trail) and is your permission slip from the customer to take future payments, so long as you give notice of the collection prior to it being carried out.

  2. Submit mandates via ACH – Your DDI needs to be submitted to the banking system via ACH, this can take up to 10 working days and you will be notified of its completion.

  3. Start taking payments – As soon as the DDI has been accepted you can start taking payments.

  4. Give notice – You must always give notice before taking payments. If you do not, you risk being removed from the Direct Debit scheme. Notice is usually given 10 working days before payment is taken but one-off payments can be made without notice if the customer requests for the payment to be fulfilled immediately.

Using GoCardless for Direct Debit

Direct Debit services for small business was once limited, but with GoCardless, it’s an excellent option. We make Direct Debit easier by handling the admin and equipping you with everything you need for payment success:

  • We handle the submission of all mandates on your behalf

  • We notify customer when payment is due

  • We help maximise payment success by ensuring you are compliant with the Direct Debit agreement

  • We keep you apprised of failed payments, and payment attempts are made up to three times

  • We integrate seamlessly with integrations like Xero and Sage, so you don’t have to rearrange your workflow to benefit from a Direct Debit facility for small business

  • We automate a job that would otherwise have to be done manually, helping you reduce costs

Need to let your customers know you are using GoCardless for recurrent payments? You can easily send them an email in-app, inviting them to create an easy one-time DDI and ensure easy future payments.

International Direct Debit for small companies

Your customers don’t have to be local for your business to benefit from the convenience of Direct Debit. GoCardless offers international payments – the only payment method designed for the worldwide subscription economy. Direct Debit services for small business can often be limited in their reach, but GoCardless removes the borders from your payments.

  • Collect in your customer’s currency from over 30 countries

  • Settle in your local currency, at the current exchange rate

  • GoCardless takes care of compliance in each market

  • Transparent transaction fee

  • Reduce churn rates

GoCardless makes it easy to accept Direct Debit. Automate payment collection. Reduce manual admin. Get paid on time, every time.

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Interested in automating the way you get paid? GoCardless can help
Interested in automating the way you get paid? GoCardless can help

Interested in automating the way you get paid? GoCardless can help

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