Direct Debit Management

Transcription

1 DIRECT DEBIT MANAGEMENT SOLUTIONS Direct Debit Management Delivering significant benefits to your business A Bottomline Technologies Guide

2 1 Introduction The Direct Debit Lifecycle This ebook outlines the steps organisations need to put in place to follow effective Direct Debit (DD) Management - Know Your Customer, DD lifecycle management and staff compliance awareness - to maximise the value of DD collections. 3.4m Direct Debit payments were made in 2013 Effective cash collection is one of the most essential aspects of good business practice. A seamless model for managing the end to end invoice and collection process is key to: Maintaining cash flow Building good customer relationships Avoiding unnecessary errors Minimising administrative overhead Today, organisations have a diverse range of cash collection alternatives; customers can pay via: Cheque 3-day Bacs Faster Payments Direct Debit (DD) Mobile payments such as PayM With 3.4 billion payments via DD in 2013 and a predicted growth to 4.2 billion by 2022* the value of the DD model is clear to businesses and customers alike. 2 * Payments Council Payments Council Report 2013

3 2 The Value of DD Business Benefits The direct payment model delivers significant benefits to business; with Bacs estimating that the annual cost saving for UK businesses using DD over paper based collection methods is a conservative 3.5 billion*. For businesses, DD provides better cash visibility and control, reduced risk and the opportunity to streamline processes. For customers, DD doesn t incur transaction fees for the payer, it minimises administration, enables payments to be spread and provides a money back guarantee in the event of error. 3.5 bn annual cost saving using DD over paper-based collections 3 * Bacs 2012 Annual Review: Bacs_corporate_report_annual_review_2012.pdf

4 Using Direct Debits, businesses know exactly when funds will arrive. Using Direct Debits, businesses know exactly when the funds are due to arrive, moving payment control from the customer to the supplier. Credit control activity is therefore minimised and debtor days reduced. Yet many companies still persist in using expensive, inefficient or outdated methods of collection; while even those organisations that have already embraced DD may not be gaining the full benefits of a highly efficient DD collection process. So how can organisations impose better DD management to streamline processes, reduce risk and improve customer acquisition? 4

5 3 DD Setup Overview Steps to Success The DD process is complex and rigorous. Ensuring every step of the DD setup process is managed effectively is key to realising benefits. 5

6 4 Streamlining Submission Electronic Submission Streamlines Processes Any organisation embarking upon DD for the first time must use the electronic Bacs service AUDDIS. However, as many as 35% of organisations are still undertaking DD management manually, risking delay, payment error and additional cost with Bacs estimating that every DD failure costs up to 50 to repair.* * Bacs Using Direct Debits: DirectDebit/UsingDirectDebit/Pages/ UsingDirectDebit.aspx 6

7 Online Submission Streamlined electronic processes reduce failure rates and improve time to first collection. Bank account verification and validation at point of entry ensure there are no inaccuracies or delays with customer form submissions. Bacs undertakes additional checks, such as the eligibility of the bank account to support DD on receipt of Direct Debit Instruction (DDI). Payment can be collected within six days of initial DDI set up. When problems can be flagged early and failures avoided, why are organisations not exploiting endto-end DD management? 7

8 5 Customer On-boarding KYC - Know Your Customer To maximise the effectiveness of the DD process, organisations need to minimise DD failure. With 71% of DD failure due to bank account and sort code error*, validation and verification up front is essential. Verifying and validating at point of entry: Checks that a bank account and sort code are valid. Ensures a specific bank account number fits the rules that associate it with a specific sort code. Verifies each account by matching bank account and sort code with personal details. 8 * Bottomline Technologies - The Hidden Cost of Direct Debit & Direct Credit research pg7.

9 By imposing strong processes at the beginning of the DD process, organisations can minimise failures. However, this only captures 75% of individuals how can a business also manage the 25% that don t have a credit history? Adding in the ability to store a scanned photograph of the customer s driver s license or passport provides another important aspect of the Know Your Customer process. By imposing strong processes at the beginning of the DD process, organisations can minimise failures, reduce the time spent repairing and resubmitting transactions and improve customer relationships. 9

10 6 Communication Communication and Lifecycle Management Customer communication is an essential and mandated component of the DD process. These include: 1. Initial letter to confirm DDI, amount to be collected and date. 2. In the event of DD failure: As soon as a company receives the unpaid DD report from Bacs: a. Customer communication must meet strict DD rules. b. Company need to decide how the money will now be collected: Will the DD be presented again? Or should the debt be chased another way? Again, the customer must be informed. 3. Formal customer notification stipulating any change to the agreed DD value, collection date(s), frequency or bank account numbers. Strong DD Management ensures the key steps are automatically managed so that every aspect of the DD process is undertaken at the right time and in compliance with Bacs scheme rules. 10

11 7 Account Switching Account Switching While many organisations may have opted to continue with a paper based approach to DDs until now, the introduction of bank Account Switching in 2013 has increased the need to improve processing. Customer awareness of the service has increased to 69% and escalating confidence is expected to increase switching numbers even higher in 2015*. Government and banks are committed to Account Switching success it is important that the process is seamless for customers. * Payments Council - Account Switching: press_releases/-/page/3139/ 11

12 The introduction of Bank Account Switching in 2013 has increased the need to improve processing. Whenever a customer changes banks the new details should be automatically forwarded to companies collecting DDs via a Bacs ADDACS report. Any failure to respond to the ADACS report will result in warnings from both Bacs and the new bank. Staff need to understand the vital importance of responding to ADACS reports and updating customer information at source on a regular basis. By combining staff education and awareness with good DDM processes, companies can ensure account switching customers receive the promised seamless experience. 12

13 8 DD Guarantee Customer Guarantee The DD Guarantee is an essential component of the process, providing customers with confidence in the collection method and the opportunity to reclaim all funds collected if an error has been made. To support the guarantee process, organisations must ensure: Customers are informed of any changes to the amount, date or frequency of the DD (usually within 10 working days prior to the account being debited). A DD is cancelled immediately when the organisation is notified by the customer. Any errors made in the collection of the DD are immediately rectified with a full and immediate refund. Using DD Indemnity Claim Automation (DDICA): Ensures response to indemnity claims within 14 days (as specified in the Direct Debit scheme rules). Reduces time and money associated with indemnity claim administration. Provides an audit trail for indemnity claims. Validates indemnity claim data and produces error messages. Notifies services users that they have a claim on the same day that it s raised. Streamlining the management of the DD guarantee is essential to reinforce customer relationships. Streamlining the management of the DD guarantee is essential to reinforce customer relationships. 13

14 9 Education Education and Awareness Ensuring staff understand the complexity of the Bacs DD scheme rules is very important. Staff need to comprehend the implications of miscommunicating with customers or mismanaging the DD process, which can affect customer relationships, public image and cash flow. For example: Under the DD guarantee, if an organisation takes the wrong amount of money from an account, or on the wrong day, the customer can demand and receive that money back from the bank immediately. There are 47 prohibited practices in the DD guide, which includes set formats for customer communication, the use of the DD logo, the content of communications and how to deal with different forms of rejection. It is essential to ensure that those tasked with DD management have the skills and knowledge required to avoid the risks of incorrect collection. 14

15 10 Payment Collection Effective Payment Collection When the DD process works well it is a seamless and highly efficient and effective way of collecting payment. Underpinning this process is accurate customer details and smooth management of the entire DD lifecycle. For those reliant on paper processes, many initial DDIs fail due to human error and misinterpretation of customer information. By improving DD Management, from initial bank verification and validation through the entire DD lifecycle and staff awareness, organisations can: Improve DD collection rates. Automate processes to reduce administrative costs. Minimise the risks associated with unexpected payment failure. Creating a seamless end to end DD process enables organisations to realise the full benefits of effective cash collection, improving cash flow and reinforcing customer relationships. 15

16 For more Information about automating your Direct Debit process please visit bottomline.co.uk European Head Office 115 Chatham Street Reading Berkshire RG1 7JX tel Bottomline Technologies All rights reserved. Bottomline Technologies and the BT logo are registered Trade Marks of Bottomline Technologies, Inc, and may be registered in certain jurisdictions. GTSuite, GTExchange, GTMatch, GTFrame, GTData, GTCloud, and GTBridge are all registered Trade Marks of Bottomline Technologies. The information contained in this document is provided for general information purposes only and does not constitute a service commitment. Ref: DDM_1412_A