A guide to outsourced Direct Debit processing
Late payment of invoices has continued its upward trend in recent times which in some sectors can be managed. However, for the majority it can be at best a problem and at worst a route to insolvency. Research by ByteStart suggests 25% of SME failures in the UK are the consequence of issues with late payments.
Research conducted by Bacs (2008) before the ‘credit crunch’ in 2009 indicated 57% of SMEs nationwide had experienced late payments at one time or another, more than half of all SMEs wanted to keep more on top of debtors, almost a third (32%) of SMEs planned to try and automate more of their essential business payments and 24% of SMEs cited cash flow problems as the main reason for late payments. Clearly since this time the impact on cash flow and the desire to tackle these issues has only become stronger.
TFM Centre partner, First Capital Cashflow Ltd (the UK’s leading Bacs approved bureau), have created an impartial checklist that your business should consider before outsourcing its direct debit processing.
Quality vs. Cost
In the economic climate we face businesses are under pressure to adopt the most cost effective services to ensure a sustainable business model. However, cost should not be the only driver when considering a direct debit processing solution.
Fee structure transparency
On the surface some solutions may seem extremely low cost. However, there may be hidden costs that can soon add up.
When outsourcing the management of financial transactions security should sit high in your priorities. Be sure to ask what security and contingency measures a Bureau has in place.
Will there be expert support as and when you require it in the first instance and ongoing? If you have critical matters that need attending too late on Friday afternoon is there going to be someone available to action your requests before the weekend?
Ring fenced client accounts
Are your funds managed in a ring fenced client account? If they are not, you are leaving yourself exposed to errors in reconciliation (as your money is effectively managed in a pot with the Bureaux other clients’ funds).
Can the Bureau meet your technical requirements? If you require an automated API integration will the Bureau be able to deliver a tried and tested solution and do they have the proof that this solution has worked effectively for other clients?
Is the direct debit service the Bureau provides fully branded i.e. are collections made in your businesses name?
Always make sure you undertake adequate due diligence to ensure you can trust the Bureau that will look after your processing.
Which payer and collection reports will the Bureau provide and are these comprehensive enough to meet your requirements?
Guide supplied by First Capital Cashflow Ltd – the UK’s leading Bacs approved Bureau.
Peyton Allen is a professional accountant that resides in Kent. When she is not working, she enjoys gardening, taking local road trips and going to the movies. She also enjoys providing reliable information on pay as you go bookkeeper Swale and Herne Bay, The Financial Management Centre Swale and Herne Bay, Part time management acccountant Swale and Herne Bay, part time inancial controller Kent.