How to set up customers to use Direct Debit

Setting up customers to use Direct Debit is a straightforward process. Firstly, obtain customer approval via a Direct Debit Mandate, which can be completed online, outlining the agreed payment details. Next, the mandate information is submitted to the Bacs system through your sponsoring bank or a Direct Debit bureau. Once approved by the bank, the setup process is complete. 

Merchants often ask us to help them set their customers up to use Direct Debit. This guide provides six simple steps to help you, the merchant, through the entire process.

By following these steps, our merchants have significantly increased customer sign-ups, improved cash flow, and spent less time processing payments.

How to set customers up to use Direct Debit

1. Send advance notice of the switch

2. Send a Direct Debit request

3. Send a reminder for customers who haven’t signed up

4. Follow up by phone for customers who haven’t signed up

5. Address any customer concerns

6. Send a personal reminder to any remaining customers

If you're already using Direct Debit, our bulk change process lets you quickly transfer your existing customers to a new provider.

1. Send advance notice of the switch to Direct Debit

First, notify all your customers that you’re planning to use Direct Debit to take payments. Ask customers if they have any questions or concerns so that you can address them as soon as possible.

You can use the below email template to tell your customers you’re moving to Direct Debit. This step isn’t strictly necessary, but many customers appreciate being notified early.

2. Send a Direct Debit request to all your customers

The below template provides customers with a brief explanation of what will happen and gives them a further chance to ask questions. You can use it to send the mandate form to your customers.

3. Send a reminder to any customers who haven’t set up a Direct Debit

If you are still waiting to hear back from a customer a week later, you can use this template to remind them to return the mandate to you:

4. Follow up by phone with anyone who still hasn’t responded

If some customers still haven’t set up an authorisation, it’s best to call them a few days before the cut-off date. Explain what they need to do and how it will benefit them.

Our merchants have found that the following explanations work well:

• Paying by Direct Debit saves time - you only have to do it once, and we’ll do everything else for you

• You can set up your payments instantly using paperless Direct Debit

• You’re fully protected by the Direct Debit Guarantee (in the UK)

• Direct Debit saves us admin time, so we can focus on giving you excellent service

5. Address any customer concerns

Some customers may still be reluctant to use Direct Debit due to concerns about control and protection. Direct Debit gives you control over taking payments from customers. But some people may worry that you could take the wrong amount or take payment from them when it’s not due.

Here are some initial ideas for how to address customer concerns. For more details, see our complete guide to addressing customer concerns.

The Direct Debit Guarantee protects customers against unauthorised payments. This means that:

• Customers must receive advance notice of the amount and date of each payment before it is taken

• Customers can get a full and immediate refund from their bank for any mistaken payment, with no questions asked

For customers who still have concerns, you could try directing them to our payers’ guide to Direct Debit. This guide provides more detail about Direct Debit and the benefits it offers.

6. Send a personal reminder to any remaining customers

If customers still haven’t set up a mandate, it may help to send them a personal reminder. The template below lets you resend the mandate so your customer can return the form without needing to search again.

GoCardless makes moving your customers over even easier

In our experience, the above steps help merchants move customers to Direct Debit quickly and easily. To make the process even smoother, we offer you the ability to:

• Support for moving your customers over to GoCardless - If you’re already using Direct Debit, our bulk change service means you can transfer all your existing customers without them doing anything.

• Add ‘Pay now’ links to your invoices - This allows your customers to click through to the GoCardless payment page directly from an invoice and set up the payment immediately.

• Offer customers flexible payment dates - GoCardless lets you submit payments every day of the month, which gives you the option of offering your customers more flexible payment dates.

• Save time & money - Obtaining authorisation is a one-time task with recurring payments. Payments will be automatically collected on the scheduled dates you set.

Find out more about collecting Direct Debit with GoCardless.

We can help

Setting up Direct Debit for your clients can be made effortless and efficient with tools like GoCardless. By automating the payment collection process, GoCardless drastically cuts down the administrative responsibilities of managing and tracking invoices for your team. 

GoCardless makes it quick and easy to get started, and with no contracts or long-term commitment required, there’s no risk. You can set up payments in the merchant dashboard in just a few clicks, and GoCardless automatically creates and sends all the necessary forms, doing all the heavy lifting for you. You can also connect to GoCardless via over 350 partner apps, such as Xero and Quickbooks.

Discover how GoCardless can be your reliable ally in setting Direct Debits for small business making it easier for you to concentrate on what matters most - your business growth.

“Not only has GoCardless given us much more freedom when it comes to collections, but it has also saved us money.” - Lee Drayton, Managing Director, LD Fitness.

Frequently Asked Questions — FAQs

How do I promote my Direct Debit?

Promoting Direct Debit as a primary payment method entails several strategic steps. Firstly, communicate the benefits clearly and regularly to your customers, emphasising the convenience, reliability, and the possibility of avoiding late payment fees that Direct Debit provides. 

Secondly, consider offering incentives such as discounts or promotional offers to customers who choose Direct Debit, making it an attractive choice. Lastly, ensure that your marketing materials, both online and offline, feature Direct Debit prominently. 

By taking these steps, you can increase the uptake and use of Direct Debit among your customers, simplifying payment processes for both parties.

What is the difference between a bank transfer and a Direct Debit?

A bank transfer and a Direct Debit are payment methods between accounts, but they operate differently. A bank transfer is a one-off transaction where the account holder manually sends a specific amount to another bank account. The account holder initiates the transfer and has complete control over the amount and timing of the payment.

On the other hand, a Direct Debit is an arrangement where the customer gives a company permission to collect varying amounts from its bank account on agreed dates. These are typically for regular payments such as utility bills or subscriptions. The company controls the amount and timing, but an Advance Notice must be provided detailing the payment amounts and dates.

The key difference lies in who initiates and controls the transaction: the customer in a bank transfer and the company in a Direct Debit. It's also worth noting that Direct Debits come with certain guarantees and protections, making them a safer choice for regular payments.

Why do companies prefer Direct Debit?

Companies prefer Direct Debit for a multitude of reasons. It provides a more predictable cash flow as payment collection is automatic on agreed dates, reducing the risk of late or missed payments. Direct Debit also reduces administrative effort and costs associated with manual invoicing and chasing payments. 

Further, it provides a lower risk of payment fraud than other methods and improves customer retention due to its convenience. The Direct Debit Guarantee offers additional peace of mind to customers, assuring them of a full and immediate refund in case of any errors, which builds trust in the payment process. 

Hence, Direct Debit becomes an efficient, reliable, and secure choice for companies to manage recurring transactions.