To give you a quick low-down, paper-based direct debit is the direct debit system where payment authorisation is taken from your customers using paper mandates (direct debit forms), whereas, for paperless direct debit it is done online or over the phone.
Here is a look at the pros and cons of each to help you decide which is the best solution for you.
Paperless Direct Debit
The Pros:
- Saves the trouble of manual processing: Paperless direct debit removes the need for manual data entry from your end. Your customer fills in the forms online, and the authorisations are automatically saved in your database.
- Brings down delay in collecting payments: As pick-up and drop-off times are a mad rush for many parents, it could take several reminders (and a number of copies of the form) before you finally get the authorisation filled out and returned to you. Online mandates take out the hassle for you and the parents as they can fill out and submit the form online - at any time of the day that is convenient for them. This also allows you to start collecting payments without long delays.
- It's the preferred option for most customers: As most customers are now used to the convenience of making their payments online, there is an increasing preference for paperless services.
- Reduced storage and administrative overheads: Paperless mandates do not require physical storage as the forms are saved online in your electronic database.
- Cheaper to set up: Paperless direct debit is cheaper to set up as it is a fully electronic process. This takes away the costs and inconvenience involved in printing, posting and storing the paper mandates. Moreover, paperless direct debit solutions such as Cheqdin are available as part of subscription-based childcare management software packages – which allows you to save further on software and set-up costs compared to stand-alone solutions.
The Cons:
- Could be harder to prove authorisation in case of an indemnity claim: The lack of a physical sign-up form can sometimes pose difficulties in proving authorisations in case of an indemnity claim. However, this is a very small risk as less than 0.2 % of direct debit payments are subject to chargebacks.
- Might require an additional monthly fee for paperless: Depending on your direct debit provider, you might need to pay an additional monthly fee to use paperless services. However, for services like Cheqdin, direct debit subscriptions come as part of a cloud-based childcare software package, with no additional fees for paperless services. You can find out more about our services on our direct debit page.
Paper-based Direct Debit
The Pros:
- Quick and straightforward if you regularly meet your customers in person: A simple and straightforward way to get authorisation from your customers if you regularly meet your customers in person.
- Ideal for customers who are averse to providing payment information online: Suitable for customers who do not have access to computers or who do not want to provide payment information online.
The Cons:
- More difficult to store the physical documents securely: As the paper mandates contain the bank details of your customers, you will need to ensure the forms are stored securely in-house with a designated person in charge of secure storage.
- Additional data-entry to save the details electronically: You will need to key-in the mandate details manually into an electronic database before storing the forms away.
- Slower to set up and higher chances of human error: The turn-around time is higher for paper mandates, and they are more susceptible to human error.
To Sum Up:
Paperless direct debit is quicker, cheaper and more convenient than the paper-based system. With most customers doing almost all their payments online, there is an increasing shift in preference towards online set-up among bill payers as well. However, there is still a small minority who prefer to continue with the traditional paper-based route.
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