A transfer is a one-off transaction where you move money between two Barclays accounts that you own, such as transferring cash from your current account to your savings account.
Standing order
A standing order is a regular payment that you can set up to pay other people, organisations or transfer to your other bank accounts. You can amend or cancel the standing order as and when you like.
Direct Debit
A Direct Debit can only be set up by the organisation to which you're making the payment. Normally, you sign a mandate that gives the company permission to take funds from your account in an agreed way – like a monthly gym membership or your mobile phone bill. It normally confirms who's receiving the payment, the account to be debited, the amount and the dates of the payment. You‘re protected under the Direct Debit Guarantee scheme so that any amount debited in error is refunded immediately.
Continuous Payment Authority
A Continuous Payment Authority (CPA), which is sometimes referred to as a recurring payment or a ‘continuous payment transaction’, is where you give a business permission to regularly take money from your debit or credit card whenever they think they’re owed money. Often payday loan companies, online DVD rental subscriptions, porn websites, magazine subscriptions and gym memberships use this method of payment.
A CPA is different from a standing order or Direct Debit because the payment instruction is with the business, not with a bank. This gives them more flexibility in taking money from your account – they can charge fixed or varying amounts, and they don’t have to specify a date when they’re going to take a payment.
Do you rely on Standing Orders to receive regular payments from customers? Do you get frustrated by unexpected cancellations or bounces? Then it’s time to explore Direct Debit solutions for business.
Over 80% of UK adults have at least one Direct Debit and it’s now the preferred payment method for more than half of the population.
Used by hundreds of thousands of businesses and organisations, it’s a flexible, reliable and secure system.
While Standing Orders are rapidly becoming an outdated payment method – inflexible, unpredictable and time-consuming – you can harness the power of Direct Debit to revolutionise the way you receive money.
This guide to choosing between accepting Standing Order or Direct Debit for automatic payments will take you through the differences and, if you opt for Direct Debit, the far-reaching benefits and efficiencies it will bring to your business.
Standing Order vs Direct Debit: What’s the Difference?
Both Standing Orders and Direct Debits achieve the same result: cash is transferred automatically from your customer’s bank account to yours on a set date.
- A Standing Order is an instruction from a customer to their bank
- A Direct Debit is an instruction from a customer to their bank that
With Direct Debit, the ball is in your court. You adapt the payment to suit your business needs, putting you in complete control.
With Standing Orders, the customer is in control. They can cancel or change a Standing Order without informing you: you’ll only discover what they’ve done when the payment doesn’t show up. This could take a month or longer, depending on the payment frequency.
Your cashflow is then unknowingly compromised and, rather than a payment on the expected date, you get a nasty surprise.
When a Direct Debit bounces or is cancelled, you’ll be notified quickly by your bureau – within 24 hours by FastPay – meaning no more daily trawling through your bank statements to check that payments have been made.
This helpful reporting allows you to tackle any issues professionally and efficiently.
Direct Debit solutions for business streamlines the resolution process: a bounced payment can be recharged within days without any action required by your customer, provided they have adequate funds in their account.
And a cancelled Direct Debit can either be reinstated by you with your customer’s consent or by your customer through their bank.
With a Standing Order, you’d still be sitting there blissfully unaware that there was a problem.
Standing Orders only work efficiently for regular, fixed payments such as rent or transferring cash to a savings account. Their inflexibility becomes more obvious when it comes to variable payments for other personal expenses such as credit card and utility bills.
For businesses, their usefulness is limited. Could it be time to bid them farewell?
Standing Order vs Direct Debit: Which Is the Smart Money On?
Still undecided about whether to use Standing Order or Direct Debit for automatic payments?
Harnessing the power of Direct Debit has numerous benefits for both you and your customers that are difficult to ignore.
Here we compare the two methods to help you reach a decision:
DIRECT DEBITvsSTANDING ORDERCashflow is king. With Direct Debit, you’ll know exactly when cleared funds will be in your account. You set the collection date, amount and frequency, leaving you comfortably in charge of your cashflow.CASHFLOWOnce set up, you’ll have a predictable income. But the onus is on your customer to arrange the Standing Order, so their very first payment might be late. They can also cancel without informing you which can seriously affect your cashflow.Your Direct Debit bureau takes all the admin hassle away. They process payments on your behalf, alert you to any issues and leave your team free to focus on other work. ADMIN TIMETime-consuming reconciliation, chasing non-payments, sending reminders and manual checking of bank statements is required. Your accounts department is tied up with the minutiae of customer payments day in, day out.Direct Debits can be processed by a bureau for as little as 3p per transaction. FastPay will invoice all these as a total amount rather than deducting our fees from individual collections, reducing reconciliation work. COSTSStanding Orders usually don’t cost your business anything to accept but you’ll pay the price in increased staff hours and customer satisfaction levels. For your customers, they need to check for any refused payments. Banks can charge up to £25 per failed Standing Order and they may then also face overdraft fees. Their disgruntlement could extend to who they were paying to incur these charges: you.A pro-active reporting system keeps you fully up-to-date with all your Direct Debit payments and non-payments. FastPay will alert you quickly to any bounces or cancellations so they can be resolved quickly and efficiently. Your accounts are instantly streamlined. REPORTINGThere’s no reporting system in place, so all payments need to be checked one-by-one manually to ensure they’ve been made. If a customer payment isn’t made, you’ll only find out when it fails to show up on your statement. Frustrating and unpredictable, the effects can ripple through your business.Armed with your recent reports, you can immediately action and resolve any failed payments. You can keep your business running smoothly as re-presenting Direct Debit bounces has a 90% success rate. Reinstating a cancelled Direct Debit is also quick and straightforward.BOUNCES / CANCELLATIONS If a Standing Order is cancelled, your customer has to set up a new one. You could be waiting a while: they could take their time, forget or just never get around to it. The worst outcome is that you lose a customer simply because of their payment method.The Direct Debit Guarantee protects both you and your customers with its in-built safeguards. This vastly reduces the risk of fraud. As the most secure form of payment available, it reassures customers and builds trust. Direct Debit bureaux are also vetted by Bacs and closely monitored by their sponsoring bank, adding another layer of security.SECURITYCustomers have no financial protection once a payment is made. They may be exposed to fraud and if this is connected to a payment to your business, your reputation may inadvertently suffer.Direct Debit has unrivalled flexibility. You can collect on any banking day, change this date with your customer’s permission and offer them the choice of which day the payment leaves their account. Amounts can be similarly altered as subscription rates increase or monthly charges fluctuate.FLEXIBILITYA completed Standing Order is a rigid, inflexible set of parameters: X amount will be paid on X date and, sometimes, for X length of time. To change any of these figures requires a new Standing Order to be set up by your customer through their bank. This is rarely at the top of their busy to-do list and could take time and a little persuasion to complete.The customer benefits of Direct Debit will noticeably boost satisfaction levels with your business. You can give them peace of mind that payment is being made automatically, offer a discount for choosing Direct Debit, provide the option to spread out their costs and help them resolve any issues quickly.CUSTOMER SATISFACTION AND LOYALTYStanding Orders, while also giving reassurance that payments are being made automatically, can be a hassle when the time comes to alter them. They can also be a potential source of conflict between you and your customer as you attempt to resolve any non-payment issues. Customers could also get late payment penalties if they don’t keep a close eye on their bank account.Direct Debit mandates can be completed and stored online. If kept in the cloud, they’re not only secure but also take up abstract space off-site rather than precious office storage or on-site server space. Moving your automated payments online brings your business fully into the digital age.STORAGEStanding orders are completed on paper and need to be physically stored on your premises. If you already have thousands of customers and your business is booming, your box file collection will only continue to grow.You are in complete control when you choose Direct Debit solutions for business. You are in charge of the when and the how much, nurturing your cashflow and streamlining your payment processes.CONTROLStanding Orders can allow your finances to spiral out of control if high levels of non-payment affect your cashflow. Stress levels among your accounts staff as they deal with troublesome customers can also affect your business.
All these brilliant Direct Debit benefits certainly give Standing Orders a run for their money.
Direct Debit Solutions for Business: Accounting Efficiencies You Can Bank On
So, you’ve chosen your side in the Standing Order vs Direct Debit debate. But just how will your business change once you’ve outsourced your payment management to a Direct Debit bureau?
1. Low-Admin Accounting
Your accounts team will be amazed at how Direct Debit transforms their day-to day work.
With the hassles and headaches of Standing Orders gone, their jobs will become easier as many complicated processes are automated. This will reduce the danger of human error and eliminate extra administrative work.
Armed with clear, up-to-date information provided by your Direct Debit bureau partner, they’ll be able to focus on the task in hand.
Time will be freed up to work on areas that have been unintentionally neglected: building customer relationships, keeping up-to-date with industry topics or focusing on their own career development.
As a result, they’ll become happier in their work with higher levels of morale and motivation to drive your business forward.
2. Fluid Cashflow
Direct Debit gives you the reassurance that your cashflow will do exactly that: flow.
The stop-start pattern of payments that can be created by accepting numerous Standing Orders will be a thing of the past.
Late payments will become the exception rather than the norm. Hours set aside to chase customers can be reassigned and your cashflow will be built on certainty.
Using Direct Debit collection services for regular income such as subscription payments removes many cashflow challenges.
Your clients are signed up to pay you at regular intervals with a predictable amount. If a payment fails, you are quickly notified, minimising any income disruption.
3. Flexibility to Reduce Financial Frustration
You’ll also know that if you want to change the amount or payment date, the onus is on the customer to do this via their bank. And who knows when that may work its way up to the top of their to-do list?
With Direct Debit, the ball is in your court. It gives you unbeatable flexibility.
When a Direct Debit mandate is in place, you can alter how much is collected and when, provided you notify your customers.
Not only is this more convenient for them, it leaves you with fewer potential problems to resolve. You can adopt a proactive approach to your accounting while focusing on other aspects of the business.
4. Predictable Pay as You Go Pricing
By choosing to appoint a bureau to manage your Direct Debit collection services, rather than managing Standing Order payments in-house, you will incur cost. However, these will be quickly recouped through a dramatic reduction in admin hours.
FastPay offers a transparent and affordable pricing structure which means fees for your Direct Debit solutions can easily be predicted, again saving your business time, effort and uncertainty.
Your accounts team will be presented with regular, straightforward invoices. And because fees are charged separately as a total, rather than from each individual collection, reconciliation is a breeze.
The amount you pay for a professional service to collect regular income such as subscription payments can be as low as 3p per transaction.
Standing Order vs Direct Debit? The answer is becoming clearer.
5. Regular Reporting to Resolve Issues Quickly
Traditional payment methods such as cheques, cash and, of course, Standing Orders involve time-consuming processing and reconciliation: who’s paid what, when and how? Who hasn’t paid? Is cash going to stop flowing?
With Direct Debit collection services via a bureau, you receive swift, automatic notifications about any problematic payments: bounces, failures and cancellations.
This comprehensive breakdown of all payments, including successful ones, allows any issues to be tackled efficiently. You stay in-the-know and fully up-to-date with all the comings and goings of your account.
Hassle-free, helpful information straight into your inbox.
6. Integration with Your Accounting Software
Making the switch to Direct Debit means you can seamlessly connect your online payment gateway to your online accounting system and your bureau’s.
Direct Debit solutions for business unlock your company’s full potential by allowing you to integrate as much or as little as you like via APIs and platforms such as Xero and Sage.
Rich in functionality, embracing this technology opens up a whole world of digital possibilities. All transactions flow seamlessly within the system, increasing payment efficiency, saving admin time and giving you a real-time cash overview.
Your accounts team can say farewell to double-keying information into two different programmes, the high risk of data entry errors and repeated exporting of spreadsheets.
Combining the logic of Direct Debit with the power of these integrations will become an invaluable part of your business’ growth.
7. Straightforward Set-Up Process
Switching from Standing Order to Direct Debit to collect subscription payments, membership fees and other regular customer income is simple and quick.
Your accounts team won’t be overwhelmed by paperwork and endless additional admin jobs just to get started.
Beyond collecting the Direct Debit mandates required to set up a scheme and introduce new members, there is minimal set-up work for them and your business.
FastPay can get you up and running in just 24 hours. They offer advice and Bacs-approved documents to sign-up new customers online, on the phone or via a paper mandate.
8. Concentrate on Customers
With many potential payment pain points gone, they can build customer relationships easily and resolve any issues efficiently.
Direct Debit’s simplicity works to reduce possible customer conflict: gone are the days of hearing the classic “the cheque’s in the post” excuse for late payments.
It’s easier to help customers clear their arrears by arranging for them to spread the cost – reinforcing your business’s helpful reputation – and the ease with which you can re-present means you can keep providing them with a continuous service.
Ask yourself again: should I choose Standing Order or Direct Debit for automatic payments? Put your money on Direct Debit and you’ll soon be reaping the rewards.
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What our clients say
We have used FastPay LTD for our direct debit collections since our companies inception over 6 years ago. At all times we have found them to be a proactive, dynamic and professional team who deliver on their word.
Phil Little – Managing Director VoIP Phone SystemsThanks to everyone at Fastpay for your work this year. Have to say we have zero issues with our direct debits and the system works really well.
Richard GuyCan I just pass on my thanks to you and your team at Fastpay for your help, support and advice for our recent transfer of our Direct Debits to Fastpay. Your team has been brilliant and helped me and my team through any problems we have come across.