Direct debits are advantageous for both businesses and their customers. For the customer, they represent convenience and a hassle-free way to access the products or services that they want. For businesses, they remove friction and potential barriers to sales. A direct debit is an easy, convenient and secure way to secure ongoing payments from your customers.
The direct debit scheme also offers surprising flexibility. Managing changes to direct debits such as amendments and cancellations is easy when you know how. In this post, we'll look at how to reinstate cancelled direct debits and frictionlessly bring your customers back into the fold.
Can I reinstate a direct debit?
Continuity is enormously important for SMEs, especially during this period of post-pandemic recovery where every customer (and every penny of revenue) counts for a great deal. If a direct debit is cancelled or needs to be amended, it’s extremely important to be proactive in order to avoid disruption for your business and your customers.
The good news is that cancelled direct debits can be reinstated, allowing you to retain the same BACS reference. However, it goes without saying that you need the payer’s permission to do so.
How to reinstate a direct debit
There are two ways in which a direct debit instruction (DDI) can be reinstated. One way is to request that the payer reinstate the DDI themselves through their bank. This must be done within two months of the direct debit’s cancellation.
When this happens, you will receive an ADDACS report displaying the reason code 'R' and showing the direct debit as ‘Live’.
Alternatively, for the customer’s convenience, you may prefer to reinstate the direct debit yourself. If more than two months have elapsed since the direct debit’s cancellation you will also need to reinstate it on their behalf. You can do this as long as you have a service user number (SUN).
If you have your own SUN, you can reinstate the direct debit yourself via your direct debit collection system. If you have a managed SUN (i.e. one that is provided by your direct debit system provider), you will need to provide them with a new signed DDI from the payer.
Understanding ADDACS reports
Under the direct debit scheme, businesses are sent reports containing vital advice on amendments and cancellations for service users.
This is called an Automated Direct Debit Amendments & Cancellation Service (ADDACS) report. The ADDACS report must be actioned within three days of its being made available.
You can download these and other BACS advice via BACS’ dedicated payment services website here.
Avoiding failed collections
Needless to say, the last thing your business needs is to reinstate a direct debit only for payments to fail because the payer’s bank details have been amended. If this is the case, you will be notified via your ADDACS reports.
These may include the payer changing to a new bank (which will be reported as ADDACS – reason code 3), or even changing to a new branch (ADDACS – reason code C).
If this happens, you have a window of three days in which to take appropriate action.
Failed collections can not only be damaging to your cash flow, they can also create friction for the customer and potentially damage your customer relationship. React as soon as you receive your ADDACS reports and you’ll enjoy a seamless continuation of payment when your customer’s direct debit is reinstated.
We can help
If you’re interested in finding out more about reinstating direct debits and eliminating barriers to sales, then get in touch with our financial experts. Discover how GoCardless can help you with ad hoc payments or recurring payments.