Understanding the 3 Main Benefits of Direct Debit for Small Businesses

Banking And Financial Messaging

Paul fannon

Paul Fannon

Feb 5, 2019

Implementing direct debit for small businesses can be intimidating if you don’t know where to start. For one thing, the process to implement Direct Debits seems complex (particularly getting accepted as a Direct Debit Originator). But then there’s also all the information about the benefits of Direct Debits that small businesses need to understand if they’re going to decide whether or not Direct Debits even make sense for their organization. That’s a big decision to make -- using the wrong method to collect payments can have a negative cash flow implication for your business, which can stifle growth.

We’ve taken a look at the benefits of Direct Debit for small businesses. Here are the steps you can take to make the implementation easy and cost effective.

Benefits of Direct Debit for small businesses

  1. Improves cash flow
    Direct Debit has many benefits to help your business grow, the biggest of which is the fact that Direct Debit improves cash flow. Having a consistent, predictable cash flow is vital for businesses of any size, but this is especially true for small businesses whose potential cash flow problems are heightened by limited budgets. As a growing business, an unpredictable cash flow could be the difference between meeting or not meeting monthly obligations and could cause serious damage to your finances and reputation in both the short and long term. Direct Debit has been proven to dramatically decrease late payments and improve cash flow. Accepting Direct Debits means that any payments made to you are pulled at a date deemed acceptable by yourself and your client, removing the possibility of customers delaying or forgetting about their payments and potentially throwing your business into cash flow shortfalls.
  2. Provides better visibility
    Direct Debits offer much better visibility of your cash status every month, ensuring you don’t need to worry about what’s coming in when, and giving you the freedom to focus on growing your business.  Likewise, your customers will appreciate your company for providing this payment option too, because it will allow them to also understand what is coming out of their bank account and when.  According to Bacs latest Direct Debit Consultation Outcomes, more than 90% of consumers with bank accounts have at least one Direct Debit.
  3. Improves customer loyalty and retention
    Customer loyalty is vital for businesses to grow sustainably. Cultivating a small group of long-term faithful customers plays a large part in building your foundation for future success. Direct Debit is an extremely trusted payment method and multiple independent studies have proven its ability to improve retention and increase customer loyalty.

Additionally, most software used to process Bacs Direct Debit payments has world-leading security features, so you can be secure in the knowledge that your payments are protected, especially with the Direct Debit Guarantee providing an extra layer of security for both you and your customers.

Ultimately, implementing Direct Debit is a win/win situation. They allow you to focus your business development efforts on growth (rather than chasing outstanding debt and replacing lost customers) and they also provide freedom and control for your customers, which strengthens their bond of loyalty.

Paul fannon

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Paul Fannon

Paul Fannon is the Chief Revenue Officer at Bottomline where he leads global sales, revenue operations, revenue marketing and go-to-market initiatives. Paul is responsible for driving revenue growth and shaping the organization’s sales strategy. Through his leadership, Bottomline helps partners and customers navigate the evolving global landscape of business payments. A 20-year veteran of Bottomline, Paul most recently served as Managing Director of Global Business Solutions where he led strategic business development and operations for Bottomline across global markets in EMEA and APAC. His prior roles included developing the company’s Client 1st customer service program and overseeing delivery of software solutions in EMEA.

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