It might take all of your imagination power to envision this but… Consider a world where you don’t have to constantly chase up late invoices. Beautiful isn’t it? You can help us (as in the world collectively) towards this business utopia by including direct debits as an option for your customers.

In this article, the Sunny Accounting team will explain what a direct debit is, how they work, and how you can incorporate them into your working practices.

What is a direct debit?

A direct debit is an automated transaction that you can use to charge customers for your products or services. The main difference between a direct debit and any other kind of payment is that it happens automatically so you don’t have to set it up every time, and the customer does not have to be present at the point of sale – making life easier for everyone.

How is this different from a standing order?

With a standing order, you can only take a pre-defined amount every month meaning that, if a client orders extra from you during a billing period, you can’t add that to the amount to be taken from your customer’s account.

A direct debit allows you to vary the amount being collected on each billing run.

The advantages and disadvantages of direct debits


Subscriptions are much easier to handle because the customer must have already consented if they intend on using the service in the future. Direct debits allow the customer to not have to worry about the payments and your business a timed and reliable addition to its cashflow.

Regular invoices can be handled through direct debits, streamlining your sales process for your most loyal customers. This has the knock-on effect of creating a better customer experience too –always a good thing not having to badger customers to pay up.

Another way that you can offer a better service with direct debit is by accepting regular instalments. This allows your customers to pay over time, while you are still in control over the money supply. This eliminates a lot of the risk associated with paying in instalments.

Cash/cheque free transactions are always desirable for business to business trade. And although they are becoming more and more common, being able to automate this process is just the cherry on top.


Chargebacks can occur if the customer does not have enough in their account to pay the bill. This can leave your business vulnerable to overextending itself based upon the payments it believes it will get in.

Informing customers in advance is a key part of the direct debit process. If you aren’t able to gain their consent, then you can’t use direct debit at all. This process can also take a longer time to achieve especially if you are in a business to business scenario and some of the customers you’re attempting to sign up have been resistant to your advances to pay them on time.

How you can use a direct debit in your business

  1. Choose your direct debit provider (this can even be done through your online accounting software),
  2. Add in the customers who wish to make regular payments and give them the option to pay by direct debit,
  3. Set up the payments that you will be withdrawing from their bank accounts. This includes both the amount and the regularity of the withdrawals.
  4. The customer will be automatically informed each time that they make a payment, so there’s no need to worry about this – your software will take care of this.
  5. The payment will clear in your account. A provider’s fee might be incurred here, but it should be no more than £2 – most automated systems linking in with packages like Quickbooks will generate separate invoices for the money you’re receiving and the fee charged by the DD provider..


We can help

If you are wondering whether direct debits are the right move for you and your business, get in touch with our team. We offer a professional accountancy service to business owners across the country, and we would be more than happy to discuss this with you.

Call us today on 01623 559 362 or email us on [email protected] for professional tax advice and guidance.

For a free chat on how we can help you, please complete the contact form below and we will be in touch.