22 June 2022

Direct Debit versus Future Payment

Direct Debit versus Future Payment 

Running a membership organisation comes with a lot of responsibilities, not least of which is collecting fees from its members. Whether you manage a database of dozens or thousands, processing these fees on a weekly, monthly, bi-annual or annual basis can be time consuming and difficult to manage. The amount of admin hassle and inconvenience alone can cause a great deal of frustration. 

From identifying declined card payments to chasing members who have neglected to pay their subscriptions, insufficient processes will likely become tedious, affect your cash flow, compromise your service and damage member loyalty.  

There are two major payment systems that are suitable for not-for-profit and membership organisations big and small: Direct Debit and Future payment.  

Direct Debit 

The Direct Debit system allows you take regular payments from your members, whether it’s a standard monthly subscription or a variable amount. It’s a direct bank-to-bank transfer, with no cards or manual payments required.  

How it works: The member gives the organisation the authority to make a charge within certain parameters and the organisations bank, through the BACS Payment Schemes Limited initiates and manages the payment process. Apart from agreeing to the setting up of the authority (called a Direct Debit Mandate or DDM), the member doesn’t have to get involved at all which makes it super-convenient. 

To set up, you can simply sign up for a GoCardless account, then share the direct debit authorisation form with your members via the ‘pay now’ button on their invoice. Once permission is granted, you can invoice your members on your membership site and the payment will be automatically debited on the due date. 

Your member will receive an email from GoCardless before every payment is collected. Once you’ve received the payment, the invoice will be marked as paid and can be easily reconciled. The GoCardless fee will also be posted as an expense in your nominated fees account. 

Why Use Direct Debit? 

For the customer: 

  • It’s safe and secure. 
  • It keeps members happy as they don’t have to switch between suppliers and enter their details repeatedly, thereby increasing customer loyalty and retention. 
  • Ease of use and convenience. You don’t have to set reminders or worry about missing a payment. 
  • Flexibility.  
  • This payment method keeps the members informed about what is coming out of their accounts and when. 
  • Customer Protection – Direct Debit is the safest payment method in the UK. 

For the organisation: 

  • Ease of use and convenience. You don’t need to worry about sending out reminder emails and texts.  
  • Direct Debit system saves time and costs. It is the cheapest form of accepting payments. You don’t need to cover the costs of using card networks to get paid, and it can be set up quickly and easily. 
  • You receive payments on time. No more worrying about chasing members or organisation expenses.  
  • It gives you control over when your customers pay you. 
  • It greatly reduces the room for oversights and cash flow issues. 
  • Increased reputation – it boosts confidence in the organisation. 
  • Direct Debit payment reduces manual work. 
  • Forecasting – your finance team will love the certainty that comes with having a Direct Debit payment system. 

Future Payment 

Future payment system allows the scheduling of a banking transaction to occur at a later date. A payment is authorised to credit a bank account, with an agreement that the funds will not be transferred and made available to the recipient until a specified point in the future. 

How it works: This payment method is commonly used to facilitate the timely payment of bills, subscriptions or employees. It can be recurrent or one-time. One-time future payment requires you to enter the specific date, while for the recurring future payment, you need to enter the payment frequency, start date, and how it should end i.e. continue indefinitely, a fixed number of payments, or end on a date. 

Future payment is done electronically, with the permission of the account holder. The individual or company legally responsible for all charges made to a credit or debit card account simply gives their account information to the depositing party. These details give the payer the right to deposit money and nothing more. 

Benefits of Future Payment  

  • Payments are scheduled to occur when sufficient funds are present in the paying account on a specified day. This greatly helps in controlling cash flow. 
  • It eliminates the risk of account overdraft. 
  • Future payments provide a way for members to easily schedule and manage their payments. 

Whether you choose the Direct Debit or Future payment method, what matters most is that it works well with your membership website plug-in and you have the right security in place. As long as these are assured, your membership site is ready to start taking payments in a safe and secure manner! 

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