1. Brings down late payments
A recent survey by BACS reveals nearly one-third of small and medium businesses in the UK are forced to wait more than two months to get their payments settled. This delay in receiving payments has a far-reaching effect, with many businesses ending up paying their staff late or cutting down their own salaries to keep the business afloat.
Unlike other payment methods, direct debit gives you control over your incoming payments. Once you have the initial authorisation from the parents, you can automatically deduct recurring or variable payments from their account based on your billing cycle. This allows you to ensure your customers pay you on time without having to get into uncomfortable conversations about discontinuing their service.
2. Lowers payment failure
Many after school clubs use cards to collect payments online. Around 5-10% card transactions fail each month due to cards expiring or being cancelled. This can bring on additional work and hassle for your admin team as well as your customers. As direct debit payments use the customer’s bank details, the likelihood of payment failures is much lower compared to card payments.
3. Reduces time spent on accounting and payment processing
One of the biggest downsides of collecting payments via cash, cheques and bank transfers is the amount of administrative work involved. From remitting payments and encashing cheques to dedicating extra staff hours to comb through bank statements and cross-check transactions - payment processing places a big administrative load on providers.
Depending on the payment provider you choose, direct debit allows you to automate the entire fee collection and reconciliation process, reducing the hours spent on processing, tracking and chasing payments.
How to start fee collection using direct debit
Here is a quick look at the different options to help you choose the solution that works best for your business.
1. Access via a Bank
You can access direct debit directly through your bank. If you meet the revenue criteria set by the bank, you will be issued a Service User Number (SUN) which will allow you full control over how and when to submit your payment requests.
You would, however, need to put down a bond and invest in your own software. But the transaction cost per payment is low and decreases further with volume. This route is ideal for big businesses with high transaction volumes.
2. Direct Debit Bureau
Direct Debit bureaus are third party providers who handle payments for you using your Service User Number or the bureau’s Service User Number. Bureaus are easier to access for small businesses as they are cheaper than banks and easier to sign up. They will submit and manage payment requests on your behalf.
Depending on whether you opt to use your own SUN or the bureau’s, you will need to pay an upfront fee of £400-£800. If you use the bureau’s Service User Number, they may withhold 30% of your funds each month to cover their risk.
Cheqdin is a specialist direct debit service for childcare providers. The service is subscription-based and easily accessible to after school clubs and childcare businesses of all sizes.
Cheqdin allows you to automate and manage your entire invoicing, payment collection and reconciliation online. There are no bonds, set-up fees or software installations. The only costs include a monthly/annual subscription fee and a low transaction cost of 1.5%. The service offers:
A quick and easy sign-up process: You can sign-up directly with Cheqdin and set up your direct debit account quickly via the Cheqdin portal.
Tracking of payment and customer set-up: Most steps of the payment collection process can be tracked conveniently from an easy-to-use dashboard.
Automated reconciliation: You can view real-time payment updates on your payment dashboard without having to go through your bank statements. The invoice status on your dashboard will be automatically marked as paid/unpaid/partially paid based on payment status.
One-stop solution to manage your business: Cheqdin subscriptions come with a full suite of afterschool management features ranging from digital attendance tracking, bookings management and parent communication to billing and invoicing. The integrated system gives you the option to avoid repetitive data entry and manage all administrative functions from a single platform.
Interested in finding out what Cheqdin can do for your afterschool club? Get in touch with one of our product experts to get all your questions answered.
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