As a business owner, it is difficult to manage and track multiple recurring customer payments every month along with the non-recurring payments. Customers can also lose track of so many expenses, especially when all of it comes together at once. In these situations, direct debit helps manage these payments according to one’s specific requirements.
Direct debit or Pre-authorised payments help customers in paying recurring and regular payments safely and efficiently. Learning and gathering information on how to proceed with pre-authorised payment can help develop a proper plan to control costs in the future.
How Do Pre-Authorised Payments Work?
The bank sends a mandate form, and after filling the form based on the scheme regulations, one can authorise the bank to directly collect money from one’s account when the payment is due.
How Can One Use Pre-Authorised Payment?
One can use the pre-authorised payment facility to collect regular bills even if they have varying amounts. For example, electricity bills vary every month, but one can use pre-authorised payments to automatically pay for them.
One can pay for subscriptions and memberships through pre-authorised payments. These include magazine subscriptions, newspapers, journals, etc.
Given below are certain advantages of pre-authorised payments:
- The account holder is notified about the deduction of the money before it is deducted for payments. If the account holder disapproves of the charge, then theN they can request a refund.
- If the payment goes to an account that does not require any payment, the bank immediately refunds the amount withdrawn, to the account holder. This is one of the major reasons why pre-authorised payment is a safe option.
The Benefits of Direct Debit on Small Businesses
Direct debit helps small businesses keep track of the predictable cash flow every month. An unpredictable deduction or fluctuations may interfere with budget planning, and may result in the small business not being able to cover their monthly expenses.
It gives a clear understanding of the inflow and outflow of money. Providing this service to customers can help them gain trust in the business, and the business owner can plan his/her future ventures accordingly. It is indeed a smart option as it helps the business owner focus more on the company’s growth and invest their time appropriately rather than chasing down their accounts receivable.
Giving customers a payment option where they get notified about the deductions can help develop increased loyalty towards the company. It also helps the company maintain a steady number of customers for a particular period. What may seem like an effortless and time-saving payment method will act as a stable way of earning income through customer loyalty and retention.
Applying this payment method can help the business owners focus on their business, and reduces the risk of negative cash flow.