The latest report from Bacs, the governing body behind Direct Debit, shows an increase of almost £2bn from £33.6bn in the first half of 2011, its highest level in nearly 5 years. Further research states that the average small business is waiting almost 30 days longer to receive payment than their agreed terms. Some large companies are insisting on as long as 120 days to settle their invoices. The second half of last year saw the average SME having £45,000 owed in unpaid invoices, an increase of £6,000 from the first half of 2011. Large corporations are the least likely to pay on time, followed by the public sector, then SMEs and finally individuals.

Earlier this week, the Parliamentary Small Business Group recommended all companies supplying to the public sector should sign the Prompt Payment Code, however there is currently no adequate enforcement of the code, so alternative solutions should be considered.

Alternative payments, such as Direct Debit, can offer the solution to this cash flow problem between SMEs and corporates. Offering payment methods that are better suited to the economic climate could mean the survival of huge numbers of small businesses. By collecting your payments by Direct Debit, both the beneficiary and the payer will prosper from reduced administration, as well as the protection that the Direct Debit Guarantee provides. Furthermore, the flexibility of Direct Debit allows for payments collections to be fixed or variable, giving you the opportunity to offer differing payment dates to your clients.

The inability to obtain a bank sponsored Service User Number (SUN – Licence to Direct Debit) or the cost of installing and maintaining Bacs approved software, has often proved difficult for SMEs. However, Direct Debit Bureaus across the UK, such as SmartDebit, can offer their fully branded managed service to organisations who cannot obtain a SUN from their bank as well as those who can.

The decision to appoint corporate lawyers comes in line with our exponential growth within the Direct Debit industry. We have set the bar high and recognised that with our ever expanding client base comes a legal responsibility to ensure the safeguarding of our business as well as our clients’. We found Mundays to be extremely proficient and showed the enthusiasm to fully understand the business of Direct Debit collections. Their pro-active approach combined with an expertise in banking and finance were key factors for us, confirming they can meet our current requirements as well as supporting us with future projects and expansion.

At SmartDebit, we recognise the value of developing long-term relationships with our clients to ensure we meet and exceed all of their Direct Debit needs. Mundays express the same ethics, leaving us fully confident that our legal partnership will continue for many years to come.

Before we began using their services, our support team were handling an average of 250 incoming phone calls per month from our clients’ payers. Generally, these payers did not recognise, or wished to query, the Direct Debit appearing on their bank statement and therefore had contacted their bank. Subsequently, our details were being passed on as the bureau processing the payment and from there it was a case of our support team passing on our clients’ contact details so that the payers could raise the query directly.

In line with the expansion of SmartDebit, we recognised that volumes of these enquiries would only increase. We tendered to a number of call centres to outsource query handling and a shortlist was drawn up. The review of each company was based on cost structure, company size, credit and risk, availability (24/7) and sector experience. As well as excelling in every area of the review, our new partner proved to be extremely helpful and proactive throughout the planning process, assembling the phone scripts, leading up to going live and subsequently handling the calls. We have consistent communication, holding teleconference reviews to discuss any issues or tweaks that might need to be made to the scripts.

At SmartDebit, we pride ourselves on providing a high level of customer service. The recruitment of our new call centre will most definitely provide our clients and their payers with an increased level of support.

As a Bacs Affiliate, we have exclusive access to the latest payments industry related research and information as well as being entitled to attend Affiliates Interest Group (AIG) meetings. These meetings will provide us with the opportunity to discuss and comment upon a wide range of payments industry topics, especially Direct Debits. Combined with our extensive payment processing experience, we intend to use this membership to determine and shape the future of electronic payments in the UK, ensuring any proposed regulatory changes are for the benefit of the industry and our clients.

However, we are frequently asked the question “What’s the difference between a Direct Debit and a Standing Order?”. Many people do not understand the difference between the two payment methods as both seem to generally do the same thing. A Direct Debit is the authority a customer gives to an organisation to claim money from their bank account, whereas a Standing Order is an instruction a customer gives to their bank to make regular payments of a fixed amount.

Flexibility and control are the main benefits of the Direct Debit system – you control the setup of the payment, so should your business need to make amendments, you can do so without having to obtain the customer’s signature each time. Furthermore, Direct Debits can be managed with a paperless solution such as SmartDebit-Admin, which supports variable or fixed collections and provides detailed reporting. If your organisation is still using Standing Orders to collect payments then you may be incurring costs that exceed the transaction fees involved with Direct Debit collections.

A prime example of the benefits of collecting payments via Direct Debit is with the VAT changes that the UK has experienced recently. With Direct Debit agreements in place, your organisation could simply amend the amount to be debited from all of your customers with a click of a button. Standing Orders are not so easy. Imagine contacting customers requesting them to cancel their current Standing Orders and reinstate a new one with their bank. Customers are unlikely to welcome the administration involved in doing this. It may also prompt customers to review your service and possibly cease payments altogether. All in all, you could be left with a reduced customer base and incur cash flow issues.

Standing Orders have attributed to the evolution of automated payments in the UK, however their usage is in decline due to the more attractive Direct Debit option providing total control, security and improved cash flow.

Customers prefer Direct Debit: Direct Debits are used to pay 67% of all regular personal and household commitments.

Speed: The money collected from your customers is deposited straight into your bank account after the Bacs processing cycle is complete. No need to handle large sums of cash or wait for cheques to clear.

Improved cash flow: Collecting by Direct Debit ensures that your organisation receives income on the selected date. This assurance allows you to plan effectively where to invest your money.

Easy to manage: Our SmartDebit-Admin portal allows you to simply add or remove payers, search customer records, amend details, edit amounts and view reports.

Reduced errors: Once details are entered into SmartDebit-Admin, they are validated in real time. Any errors can be quickly rectified.

Flexibility: The debit amounts and the collection date are selected by you and can be edited at any time via our online portal.

Security: The Direct Debit Scheme Rules and Guarantee ensure debits are taken and processed in the correct manner, and also provides a fair system for any payments taken in error. As well as adhering to the strict rules and regulations, SmartDebit has industry leading security and resilience measures in place.

Click here for more information on selecting the right Direct Debit Bureau.

Call our sales team for advice on how you could benefit from our Direct Debit solutions.

The findings are a slight improvement on 2010 when the figure was £6.2bn, with the average owed to SMEs also declining from £25,000 to £18,000 in 2011. These figures are still highly damaging as research indicates that 256,000 businesses in the North experience late payments, with nearly one in 10 admitting to be very worried about waiting for payments.

The average waiting time for payment is almost twice as long as the original terms agreed with their customers. Approximately 55% of businesses in the North agree to receive payment within 30 days of the invoice, however, on average they have to wait a further 24 days after that, making it nearly two months before being paid.

Mike Hutchinson, Head of Marketing at Bacs, commented on the issue “The problem of late payment is ever-present for SMEs in the North and nationally the value of late payments has reached a new high of £33.6bn. At a time when firms in the North need to plan ahead for growth to ensure a strong cash flow, they are hanging on for payments which could have a serious impact on their business. We urge SMEs working in the North to look at what payments can be automated to help them assert more control over their cash flow, and hopefully alleviate some of that stress on the business and its owner.”

This is where SmartDebit can help. By signing up your customers to pay by Direct Debit, late payments will be a thing of the past. SmartDebit will help you to improve your business’s cash flow and control. You will be able to collect your bill payments on time, every time, with the exact amount and date selected by you. Our paperless Direct Debit service will allow you to administer your collections or offer customers the ability to sign up to your services via your website.

Direct Debit is the safest and most efficient way to collect your business payments and will remove your payment headaches. Research shows that 63% of SMEs report that their invoice is waiting for authorisation, 52% hear that their invoice is being processed by accounts and the old chestnut ‘the cheque is in the post’ is still up there with the top excuses, with 56% of businesses citing this reason for late payment.

The issue of late payments is damaging to businesses which are relying on good cash flow in order to keep operating in the current economic climate. Automating your payment collections through SmartDebit will help resolve this problem by putting you back in control, allowing you to focus on core activities rather than worry about when payment will arrive.

An acronym for Bankers’ Automated Clearing Services, Bacs was founded in 1968 as a not-for-profit, membership based organisation. It is owned by 16 of the leading banks and building societies in the UK, Europe and US. Bacs is responsible for the schemes behind the clearing and settlement of automated payments in the UK including Direct Debit and Bacs Direct Credit.

Since its formation over 40 years ago, over 90 billion transactions have been debited or credited to British bank accounts via Bacs. Recent figures released from Bacs show that almost 5.7 billion UK payments were made via Bacs, with a total value of £4.3 trillion.

Bacs and SmartDebit

In order for SmartDebit to submit transactions through Bacs clearing on behalf of third-party organisations, we must be approved by Bacs. This approval is subject to the scheme’s rules, guidelines and regular inspection audits. Learn more about SmartDebit Approved Bureau.

Bacs operates a three day cycle for the Direct Debit payment process (see below). As a commercial Direct Debit Bureau collecting customer payments on behalf of organisations, our systems processes ensure the collections file is submitted to Bacs on time to ensure our clients receive their funds once the Bacs cycle is complete.

This pan-European initiative aims to create a single market for euro payments, where cross-border payments can be made easily and efficiently as they are within nations. Estimations reveal that SEPA could save up to $160 billion within six years of migration, benefitting clients, banks and businesses

The original goal was to achieve gradual migration to SEPA through self-imposed deadlines driven by the banking industry. However, this proved ineffective, as there has been resistance from migrating from the old national payments system to the new SEPA model which has forced the European Parliament to adopt end-dates for migration.

“This regulation really benefits citizens. It will enable them to make payments from one bank account to others all over Europe, just like a normal domestic payment. It will be possible to make all cross-border credit transfers and direct debits in the same way as normal domestic payments. A person working abroad will not need to open a new bank account in the host country, but may receive his or her salary in the home country bank account. Companies will benefit too, by not needing more than one bank account in Europe for each payment purpose”, said SEPA rapporteur Sari Essayah.

SEPA & SmartDebit

In order for SmartDebit to offer SEPA payment processes, a major investment to re-develop systems has been made, culminating in rollout later this year.  Our commitment is that SEPA will be made available via SmartDebit-Admin portal and SmartDebit-API this current year 2012, awaiting the 2014 legally binding live date from banks.

1st Reason: Length of time to set up?

SmartDebit: 2-3 weeks

Bank: 2 months +

As soon as the agreement is signed, we are totally focused upon integrating our service with your organisation. This allows us to complete the required tasks to get you up and running in as little as 2 – 3 weeks. Banks on the other hand, have a multitude of different services and procedures, which ultimately pushes the length of implementation time up.

2nd Reason: receive in-depth advice?

SmartDebit: Yes

Bank: ?

SmartDebit have been processing Direct Debit payments since 1998. Our experienced and trained executives will explain the entirety of the process involved and answer any questions you may have surrounding the collection of Direct Debit payments by your organisation. This level of expertise may be hard to find at a bank relationship manager level due to the centralisation of payment service resource.

3rd Reason: Help with completing forms?

SmartDebit: Yes

Bank: ?

If you are applying for your own Service User Number (SUN) from your bank but still want to outsource to SmartDebit there are a number of application forms that need to be completed. These forms can be very complex which is why our advisors will be on hand should you require assistance at no cost.

4th Reason: Do I have to purchase software?

SmartDebit: No

Bank: ?

There is no need to purchase software when collecting through SmartDebit. You will receive access to our easy-to-use SmartDebit-Admin portal, giving you total control and transparency when administering your collections. Banks often promote the sale of Direct Debit software.

5th Reason: Will there be on-going maintenance involved?

SmartDebit: No

Bank: ?

As a Direct Debit Bureau, we take care of everything. Our compliance team ensure all of our systems are in accordance with the continually evolving Direct Debit Scheme rules and Bacs procedures.

6th Reason: Is the process automated?

SmartDebit: Yes

Bank: ?

Our systems offer real time account validation when a new payer is signed up through our online SmartDebit-Admin portal and we are Paperless and AUDDIS compliant. Some banks still operate a paper mandate service whereby your customers will have to complete a form, which then has to be sent to the bank for data capture. With SmartDebit you can sign up customers by phone, online or face-to-face.

7th Reason: Can online Direct Debits be set up?

SmartDebit: Yes

Bank: ?

We set up an online service enabling your payers to sign up via your website using one of the following options:

Hosted ‘white labelled’ service

Fully branded API service

Arranging everything in-house can be disadvantageous in terms of development costs, on-going maintenance, security compliances, IT support and time.

8th Reason: Will I have a personal account manager?

SmartDebit: Yes

Bank: A relationship manager who may not be experienced in Direct Debits

You will be provided with your own personal account manager who will guide you through the initial implementation process as well as being a phone call away, should you have any queries about the service.