An arrangement made by people with their bank for allowing third parties to transfer money from their account on agreed dates. Many businesses have begun to encourage their customers to use the option of direct debit to make payments and even provide incentives, like discounts, to get them to use this method. This is due to the fact that there are some important reasons of using this option. What are they? Read on to know more:
It makes a big difference in cash flow
One of the most important reasons for encouraging direct debit collection is because it makes a big difference for your cash flow. Businesses know exactly when they will receive funds and this reduces problems for oversights and cash flow. Regular and timely payments are received and this allows a business to clear their own payments in a timely manner.
It helps in customer retention and loyalty
When a business is interested in retaining customers and ensuring their loyalty, then direct debit collection can make a big difference. When customers set up direct debit payments, they are less likely to switch to a different company because it is easier for them to continue with the familiar. In addition, direct debits are usually covered by a guarantee, which protects both the business and the customer in case there is a problem.
It reduces payment failures
A number of businesses have to deal with payment failures on the end of their customers when they are using their cards. This could be due to card cancellation or card expiry. Almost 3% to 5% payments fail every month and this can be a huge problem for businesses. With direct debit collection, this is not a problem because the customer’s bank details are used, which rarely change or expire.