GoCardless is the UK’s leading Direct Debit provider, providing payment services for more than 25,000 businesses. They process over £3bn worth of transactions with clients ranging from small businesses to household names, including Sage.
GoCardless are authorised by the Financial Conduct Authority (FCA) to provide payment services as an Authorised Payment Institution and serve more businesses than any other Direct Debit provider.
Direct Debit payments are particularly good for:
- Regular payments – for example, subscriptions or regular donations.
- Customers with an ongoing relationship – for example, account customers.
- Invoicing for services – for example, accountancy, or tax advice.
Direct Debit payments are not so good for:
- Transactions which need instant clearing – for example e-commerce.
- High-value, one-off payments for liquid goods – for example gold bullion.
- Transactions likely to experience chargebacks – for example gambling.
Note: GoCardless Direct Debit payments can be for a minimum of £1/€1 and a maximum of £5000/€5000.
What is Direct Debit?
A Direct Debit authorises you to collect payments from your customers bank account when they are due. Your customers give this authorisation by completing a Direct Debit mandate online. Once authorised, you can automatically collect payments from your customer.
Two things make Direct Debit unique:
- Direct Debit is a bank to bank payment method – There are no card networks involved. This makes it cheaper.
- Direct Debit is a pull based system – Instead of a business waiting for the customer to push funds, the business has permission to pull funds when a payment is due.
Paying customers are notified before a payment is taken, and details are taken using a secure GoCardless hosted payments page.
The Direct Debit Guarantee
The Direct Debit Guarantee is the Direct Debit scheme’s consumer protection. The Guarantee protects consumers against payments made in error or fraudulently. The guarantee protects customers in these ways:
- Notifications – customers must be notified in advance of each payment.
- Refunds – customers are entitled to a full and immediate refund of any payment that has been taken in error.
- Cancellations – customers can cancel a Direct Debit mandate at any time by contacting their bank.
Direct Debit mandates
In order to take payments by Direct Debit your customer must complete a Direct Debit mandate. This authorises you to take payments using Direct Debit.
Before you can collect payment by Direct Debit, your customer must issue you with a mandate. This mandate is called a Direct Debit Instruction, or DDI, although it is commonly referred to as a Direct Debit mandate.
The details of each authorisation are standardised:
- All future payments are authorised, so you can collect any amount at any time from your customer.
- Your customer must be notified of each payment before it’s collected. When you request a payment, an email is automatically sent to your customer.
- All payments are covered by the Direct Debit Guarantee, which protects customers from payments taken in error. See more details on the Direct Debit Guarantee.
The notification requirements of a DDI and the Direct Debit Guarantee help protect them from any other payments taken in error or fraudulently.
Direct Debit payment timings
GBP payments using Bacs
Once submitted to the banks, the Direct Debit Instruction will be active within a couple of working days. Once active you can start taking payments against it.
Once submitted to the banks, Direct Debit payments are processed using the Bacs three day cycle.
- If a Direct Debit mandate is already in place, payment is collected 2 working days after submission, can be considered 99% confirmed 3 working days after submission, and 100% confirmed after 4 working days.
- If a Direct Debit mandate needs to be created, payment is collected 4 working days after submission, can be considered 99% confirmed 5 working days after submission, and 100% confirmed after 6 working days.
Euro payments using SEPA
Payments take at least 2 interbank working days under the B2B scheme and 3 interbank working days under the Core scheme to clear on your bank account.
Cut-off to submit payments in SEPA Core Direct Debit Scheme:
- For first payment collections, you must submit the collection to the banks 5 interbank business days before the payment due date.
- For subsequent payment collections, you must submit the collection to the banks 2 interbank business days before the payment due date.
Cut-off to submit payments in SEPA B2B Direct Debit Scheme:
- Under the SEPA B2B Direct Debit Scheme, you will need to submit a collection to the banks 1 interbank working day before the payment due date.
How will my customers pay by Direct Debit?
To set up Direct Debits and pay the invoice, your customer will follow these steps:
- The customer receives your invoice, then clicks Pay Now and chooses Direct Debit.
- The customer enters some personal and bank details to set up the Direct Debit.
- The Direct Debits will usually take 2 days to be processed.The customer will receive an email confirmation from GoCardless when it is processed.
- Once the Direct Debit is processed, the payment will usually take 4 days to be collected.The customer will receive an email notification from GoCardless when you initially request the payment, which is when you print the invoice in Sage 200.
- When you next print an invoice for this customer, the payment is sent automatically to GoCardless. The invoice will not include a Pay Now button, so your customer can’t accidentally set it up twice.