Follow-up debits explained


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  1. Introduction
  2. What is a follow-up debit?
  3. How does a follow-up debit differ from a one-off direct debit or an initial direct debit?
  4. What are the benefits of follow-up debits for businesses?
  5. How can customers cancel a follow-up debit?

There are many different types of direct debits, including follow-up debits, initial direct debits and one-off direct debits. In this article, you will learn the differences between these different types of direct debits, what exactly a follow-up debit is, and the pros and cons of follow-up debits for businesses.

What's in this article?

  • What is a follow-up debit?
  • How does a follow-up debit differ from a one-off direct debit or an initial direct debit?
  • What are the benefits of follow-up debits for businesses?
  • How can customers cancel a follow-up debit?

What is a follow-up debit?

A follow-up debit is a standard payment process in which the company obtains permission to debit a customer's account automatically. It takes the form of a one-off direct debit authority for a particular payment, which can then be used again at a later point in time when another payment is due. For businesses, a follow-up debit offers a reliable, secure and efficient way to arrange and execute payments. It ensures that businesses receive regular payments, which helps them with invoice planning and revenue forecasting.

Follow-up debits are particularly useful for businesses with recurring payments, such as monthly subscriptions or membership fees. They can also be used for other types of services, such as recurring fees or lump-sum payments. In addition, the process can help ensure that payments are received more quickly and can facilitate automatic invoicing.

However, prior to collecting a follow-up debit, businesses should be aware that there are certain rules that need to be followed. If valid consent has not been obtained from the customer, if information has been entered incorrectly or if more debits have been taken than agreed upon, this can lead to disputes with customers. It makes sense to have the terms of the direct debit in writing and ensure that the customer signs a copy of the document. In this way, businesses can ensure that all aspects of the direct debit process have been properly fulfilled and avoid any potential disputes.

How does a follow-up debit differ from a one-off direct debit or an initial direct debit?

As a business, it is important to know and understand the different types of direct debits in order to use them effectively. A one-off direct debit is a payment in which the company is only authorised to debit the amount once. Therefore, a follow-up direct debit is not possible here. In contrast, an initial direct debit authorises a company to debit the amount for the first time and at a specified time. An initial direct debit offers more flexibility in terms of payment deadlines than a one-off direct debit. For example, the company may delay the withdrawal of funds for a few days to ensure that the customer's account is funded. An initial direct debit can be followed by a subsequent direct debit.

While a subsequent direct debit can be debited a second time or more times, these debits do not have to be made at regular intervals. However, with a standing order, debits are always made at regular intervals and for an indefinite period of time. In addition, a standing order is set up by the person liable to pay it.

Learn more about direct debits.

What are the benefits of follow-up debits for businesses?

Follow-up debits are an efficient way for companies to reduce their costs and optimise their payment processes. They offer a high degree of security and efficiency when processing payments. Businesses can use follow-up debits to make their manual processes more efficient. Many banks offer an automated direct debit service which enables invoiced amounts to be deducted directly from customers' accounts. This saves time and money as no information needs to be entered manually and settlements can be made more quickly.

Follow-up debits also offer a high degree of security as they prevent unauthorised payments. With all customer data stored in a secure database, businesses can trust that payments will be processed correctly. Moreover, the risk of fraud or unauthorised debits is also low, as the customer data can be checked for each transaction.

In addition, follow-up debits can also be used to optimise a business's cash flow. Using the automated direct debit service, businesses can accelerate their payment processes and increase sales. By examining past and planned follow-up debits, businesses can gain a real-time insight into the status of their accounts receivable and liquidity planning.

How can customers cancel a follow-up debit?

Customers can cancel follow-up debits very easily by notifying their bank of their intention to cancel. When doing so, they should ensure that they give notice promptly to stop any subsequent payments from being debited. To this end, you should notify your customers in advance about the conditions for follow-up debits, and give them the opportunity to cancel the direct debit if needed.

Businesses should also ensure that their customers' data is kept up to date and that any changes are implemented quickly. This will help to prevent direct debits from continuing inadvertently. Clear communication and transparency help to build confidence and lead to a positive customer experience.

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