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Direct debit payments, commonplace in Europe, are becoming popular in the United States. Businesses that bill monthly--especially those with international clients--benefit when they have the ability to accept direct debit payments. Accepting automatic payments takes the burden of the payment transaction away from the customer, or payer, and places it on the payee. Your business will be less susceptible to problems caused by late payment or non-payment if you accept direct debits.
Steps
Contact your bank. Get a Service User Number (SUN) or Automated Clearing House (ACH) account number for your business banking account, as you need this to enroll in direct debit programs. Confirm with your bank that you have the proper account to accept direct debits. Ask your bank if they use AUDDIS (Automated Direct Debit Instruction Service). This will save time with bank transfers and eliminate paperwork.
Sign up with an ACH, BACS (Bankers' Automated Clearing Services) bureau or similar payment processing service. Automatic payment processing requires enrollment and sometimes a contract with a service provider other than your bank. The electronic funds transfer networks work in co-operation with banks to transfer funds from the payers account to the payees account.
Link your ACH or BACS account to your bank account. Ask your business banker to confirm that your automatic clearing service account number is routed to your bank account. Once that is done, ask your ACH provider to confirm your bank account. Some providers will do a small transfer to confirm that your account is working.
Begin processing direct debits from authorizing customers by acquiring automatic billing or direct debit authorization information--most importantly, the customer's bank account number. Merchants in the United States must acquire the payer's routing number and the bank account number. In Europe, merchants need a SUN and payer's consent.
Process direct debits. Once you provide your customer's account information to your BACS or ACH service provider, it usually takes a minimum of 3 days for the money to go into your bank account. There are 3 steps to direct debit processing: submission of payment to BACS or ACH, processing and clearing. After these steps are accomplished, you will see the payment in your account.Advertisement
Expert Q&A
Video
Tips
- Banks in the US and Puerto Rico use the ACH system, while the UK and Europe use BACS bureaus or similar agencies.Thanks
- Direct debits are sometimes referred to as pre-authorized payments (PAP), pre-authorized debits (PAD), automatic payments, or automatic debits. Keep this in mind when dealing with international bankers or clients.Thanks
Warnings
- As with checks, money is not guaranteed. If the payer's account has non-sufficient funds you may be charged back.Thanks
- Some banks require businesses to have minimum average balance to be enrolled in direct debit services.Thanks
References
- http://www.bacspayments.co.uk/FAQ.htm
- http://ach-payments.com/how-to-accept-ach-payments
- Raymond Dong, Bank of America Treasury Management Department
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