Direct Debit Blog

BACS, the company behind the UK Direct Debit Scheme has released details of their latest findings relating to overdue payments to Small to Medium sized enterprises.

The research indicates that 58 per cent of SMEs found that large companies dictated when they wanted to pay their invoices, and 44 percent of SMEs that experienced late payments said that larger companies were the main culprits when it came to paying late.

With an average wait of 38 days for their money, it is no surprise to find that the current national 'late payment' debt is around £30.2 billion. The average business is waiting for £31,000 in late payments and around 10 per cent of SMEs who experience late payments are owed £50,000 or more.

Being based in Cheltenham, we can't escape the fact that it's the Cheltenham Racing Festival here in the town.  Friday, March 15th is the last day of the festival, with the highlight of the week - the Gold Cup Steeple Chase - taking place at 15.20 over 3 miles, 2 1/2 furlongs.  

Eleven runners are taking part:

Bobs Worth (8)
Bog Warrior (9)
Cape Tribulation (9)
Captain Chris (9)
Long Run (8)
Monbeg Dude (8)
Silviniaco Conti (7)
Sir Des Champs (7)
Sunnyhillboy (10)
The Giant Bolster (8)
Wayward Prince (9)

Direct Debit is a flexible and powerful payment method which has a proven forty year track record. One of the reasons Direct Debit remains so popular is because the general public has complete trust in it because of protection offered by the Direct Debit Guarantee. In a blog article last year, we discussed how the Direct Debit Guarantee introduces an element of risk to collections by Direct Debit, and how that risk to the collecting organisation (Service User) needs to be managed.

In the current economic climate, it is become more and more important for small businesses to ensure that they receive payments on time.  Cash flow can become a serious problem if several invoices aren't paid in a timely manner and the 'cheque in the post' excuse begins to wear thin.  

Michael Fallon MP has been a supporter of the Prompt Payment Code which seeks to sign companies up who agree to the following three principles:

(1) To pay suppliers on time.
(2) To give clear guidance to suppliers regarding payment terms and systems.
(3) To encourage good practice within their industry sector and promoting subscription to the code.

A recent report from the Economist Intelligence Unit suggests that poor quality automated decision making is causing financial firms to lose money.

Financial firms increasingly rely on computerised decision making when making decisions on what products and services to offer its retail and corporate customers. A defined set of data regarding the customer's financial status, business and history are fed into the system, and based on predefined criteria, a decision is made by the computer. The EIU survey sponsored by Ricoh found that 37% of of the firms surveyed felt that they had lost money at least once in the previous six months and 31% felt that they had lost custom as a result of poor automated decision making.

The pervasiveness of computerised decision making has not gone unnoticed by the general public and satirists; most notably Carol Beer, a character from the comedy series "Little Britain" coined the phrase "Computer says no" which is now synonymous with inflexibility of the results of an automated decision.

From the 31st December 2012, changes took place to the way that Investment Advice is paid for by consumers.  

The FSA's Retail Distribution Review (RDR) effectively bans one of the key sources of income for Britain's IFAs - commission earned from fund providers when a client invests money in their product.  The FSA has suggested that the change in income structure will help reduce conflicts of interest; where rogue IFAs may suggest an investment based on the level of commission that they would receive as opposed to whether the product is suited to the client's needs.  

Many IFAs have suggested that they will struggle to change to the new structure where upfront fees are charged to clients as opposed to commission incomes.  It is suggested that clients will be reluctant to pay fees of around £200 per hour for investment advice where previously these were covered by commission arrangements between IFAs and their fund providers.  

Direct Debit was the first digital payment out of the blocks, and it surprises most to learn that this was more than forty years ago (1970 to be a little more precise) when BACS was known as the Inter-Bank Computer Bureau.

Since then, the company's name has changed, but the concept of Direct Debit hasn't. Yet over the past decade, the popularity of this method of payment continues to grow from strength to strength with the number of organisations taking Direct Debit steadily increasing. Figures from BACS indicate that 72% of household bills are paid in this way, and some 39% of the population would prefer to pay all bills by Direct Debit.

The reasons for the popularity of Direct Debit seem fairly sound: the bill payer is safe in the knowledge that their bills will be paid automatically, on time, and without any intervention. Furthermore, should anything go wrong during the collection process (e.g. the wrong amount is taken, the amount is collected early or late, or no advance notice was received) then the payer is protected by the Direct Debit Guarantee.

Our clients will no doubt be aware that Christmas Time is almost upon us. With the festive cheer, comes bank holidays, and extra non-processing days with BACS. Please therefore be aware that direct debits may be collected a little later than usual. The table below shows when your Direct Debit will be collected from your bank account:

Please ensure that sufficient funds are in your account on the day that your payment will be collected.

For more information, please contact our Customer Services department.