How to accept direct debit payments

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One of the problems I find when running my own business is in getting paid on time and keeping a healthy cashflow. The last thing I want to be spending my time on is chasing late payments from my customers - it takes up time, and aggravates customers.

Having relied on customers to set-up Standing Orders in the past, I still had the problem of a small percentage of customers paying late and taking up a lot of administrative time to chase-up, so this was a problem as yet unresolved.

Then the other day at one of Rentadesk's weekly group mentoring lunches the conversation heated up when we turned to the topic of how to deal with late paying customers. Rentadesker Ellie of @TruffleSocial told us how she had used a company called Go Cardless to accept direct debits. This was news to me as I thought direct debits were only for big companies, I hadn't realised there would exist third parties to provide a direct debit service.

Ellie recommended Go Cardless as they offer free setup, slice a 1% commission on all sales and hold the cash for 7 days - simple to understand and simple to setup. However, being the kind of person who likes to do some research before choosing to buy, I Googled 'How to accept direct debit payments' and came up with a few other providers including Paymill, Smartdebit and Eazipay.

Smartdebit didn't show online pricing so I didn't follow it further. Paymill transaction fees at 2.98% seemed a bit high, so again I didn't follow any further. Deciding on an Eazipay vs GoCardless smackdown I drew up a comparison chart to summarise the main differences (see fig 1.)

fig 1. Eazipay vs GoCardless

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Eazipay

GoCardless

Initial Setup Fee

£495

Free

Setup Fee per Payer

£1.50

Free

Setup Time

2 weeks

Instant

New Payer Drect Debit Mandate

Signed by Payer. Details emailed in Excel spreadsheet to Eazipay, and signed mandate posted to Eazipay as confirmation

Payer completes Online

Fee per Transaction (deducted at source)

£0.40

1% (max £2)

Maximum Transaction size

£5,000

Unlimited

Funds Cleared

3 working days

7 working days

Payer's statement entry

[Your Company Name]

DIRECT DEBIT TO GOCARDLESS.COM REF [Your Company Name]

Failed Payment

Automatically re-present Direct Debit requests after 10 days

Email notification. Retry payments manually through GoCardless dashboard

Accounting Integration

None

Integrates with Xero natively for one-off payments. For variable direct debits use a Xero add-on called 'Directli' and have your customers charged each time you raise an invoice

Security

All funds are held in a ring-fenced client monies account

All funds are held in a ring-fenced client monies account

For Rentadesk's purposes (ease of use for us and our customers, and integration with our accounting package Xero) GoCardless seems the best option - so I am going to be opening an account with them. For companies with a large number of transactions and more staff to deal with the administrative work, Eazipay may be the better solution as their ongoing costs are lower.

Do you have any experiences to share using GoCardless, Eazipay or any other direct debit services I haven't mentioned? Please let me know below.