Taking Monthly Payments

[Tim Barlow]

I know Stugster is looking into this at the moment so I thought I'd share my experiences.

If you have ongoing billing arrangements with clients and want to reduce the time you spend on credit control then it appears as if you have the following options for taking monthly payments:

• standing order - the perfect solution if you take the same amount each month. Cheap and open to anyone.
• direct debit - if you can get the banks to give it to you (and it's a very big IF) then this is a cost effective way of collecting variable amounts each month. If you can't persuade the banks then there are third parties who can offer the service. They will look for a personal unlimited guarantee (something to avoid signing if at all possible) or a deposit. There are significant risks associated with direct debit which you need to fully understand before taking DD payments.
• credit card - a more expensive but lower risk way of collecting regular or variable amounts. Available to anybody.

(Any other solutions out there?)

 

[stugster]

PayPal lets you create a subscription - but this would have to be the same amount each month. You would also have to pay the PayPal fees. Some customers may be put off by the fact it's "online".


Standing Orders - my issue with this is that I have no evidence (other than the money finally arriving in my account) that the order hasn't been cancelled. Unless it was set up in a way that all orders came in on the same day or I had someone able to check every day and do the books for it, it's quite laborious.

 

[Tim Barlow]

• Book keeping - possibly the first thing any business should delegate
• Definitely try to have a single payment day.

If you take the same amount each month, then standing order is so the way forward. Once the money is in the account, it can't be taken out again. Unlike the other methods.

 

[Scottish Business Owner]

Trying to get an OIN (Originators Identification Number) from a bank to implement a DD system can be very difficult and on top of that you also have to consider the cost of any software you use to collect payments. Tim is right in pointing out the issues with DD as the direct debit guarantee can effectively give the customer the right to claim back direct debits going months back!

I guess it's the inflexibility of S/O given that it's a fixed amount that's the issue. What i've done in this scenario is to set up a standing order for the fixed element of the monthly cost and then issue an invoice at month end for any extras with maybe a Payal button actually on the invoice to remind the customer to pay. You will also incur far less charges than using third party originators for DD or paypal subscriptions.

I wouldn't be totally ruling out the third party direct debit collectors entirely as they can be very useful and percentages can be negotiated. If S/O does become too inflexible then this is a good way of collecting monies