If your business is not using direct debit in some way you probably have some incorrect idea about the usefulness of it. Forget what you think you know about direct debit. Direct debit does not mean lock in contracts, and it doesn't even mean subscription or ongoing service.
The truth is that you can reap the benefits of pre-approved payment agreements no matter what type of business you run.
In the most simple terms direct debit is permission from your customer to automatically deduct their credit card, debit card or bank account. Technically you could use direct debit to collect on one single payment if you really wanted.
Below we'll take you through several different use cases for direct debit, how Pinch facilitates them in each context and demonstrate why every business should have a direct debit facility in place.
Automatic Payments for Subscriptions and Ongoing Service Models
Lets get the obvious out of the way immediately. Subscribing to an ongoing service is the bread and butter of direct debit. When you sign up to a new phone or internet provider you probably expect to automatically pay them. You also probably have half a dozen direct debit agreements in place for things like Netflix, gym memberships, insurance, charity donations and more. The attractive nature of having a business with a high percentage of automatic recurring revenue has seen the "subscription model" expand to include things as esoteric as underpants subscriptions, toilet paper and juggernauts like the Dollar Shave Club.
Of course, Pinch can enable you to collect on these types of payments in a range of ways. You can either set up your subscriptions within Pinch or use Pinch to manage the pre-approvals and collect the payments that are raised from your third party system.
Pinch can even be used for collecting payments inside of other software using our API integration. Find out more about that here.
Collecting Unpaid Invoices With Automatic Payments
One of the other common use cases for direct debit is collections. If you have a customer that owes you a large sum of money you can use Pinch to break the invoice/s down into smaller chunks, get the customer to agree to automatic debit and collect the smaller amounts over time. Check out our help centre to find out how to breakdown an existing invoice using Pinch.
Remember to ensure the customer has a pre-approval agreement in place before you break the invoice down otherwise the payments won't automatically be collected. Click here to find out how to set up pre-approvals.
Automatically Collect Payments from Repeat Customers, Even if the Amount is Different
Are you a business that provides a repeat service to your customers, but the amounts vary? This can range from home services such as pool maintenance companies, cleaners and gardeners, through to office professionals such as copywriters, graphic designers, digital marketers, lawyers and solicitors. Which covers most small businesses.
Most will invoice after the job is done then wait for your customer to make or miss the payment. This leads to having to chase up late and non payment on services that you've delivered already. This often creates an entire role for someone, or in some cases, an entire department.
Newsflash, direct debit can work for you too, and save you making unnecessary hires in the process.
Pinch is designed to handle what we call variable recurring payments. Lets assume for example you are a Pool Maintenance Company. When you sign-up a customer for routine pool maintenance you can get them to opt in to a pre-approval agreement, set the payment limit to be whatever you want and then any invoice that flows into Pinch that is under the payment limit will automatically debit on the due date. The limit is also optional.
For businesses that use field management software that can create invoices in Xero, MYOB or QuickBooks, Pinch can completely remove one of the most time consuming and difficult parts of running a business, debt collection. And the above applies to any business that delivers invoices to the same customer with invoice totals that change all the time not just tradies and home services companies.
All you need to do is have a plan for persuading your customers to agree to the pre-approval. Luckily we have an article for that.
Automatic Payment Plans For Projects
For companies that do projects, payment collection can be quite painful. What do you do when a customer misses an instalment payment. Do you stop work and move to the next project? What if that project isn't ready to start or you don't have one? The light's need to stay on. A customer missing a payment milestone in a project is probably the most frustrating part of doing project work.
Most of the time a customer avoids making the payment either because they are too busy, they prioritise something else or because they simply can and they know you'll keep working anyway. None of these are reasonable reasons. So make pre-approval your standard and do not waiver. That way you and your delivery team can focus on delivering the best possible outcome for the client and the project.
You can do this in a range of ways in Pinch. You can get your customer to agree to the pre-approval during their onboarding (more on that here) and automatically collect on any invoice you raise, allowing you to set up the invoice schedule in your accounting system, or you can use the Pinch tools to breakdown a single invoice and apply a payment schedule to it that way.
Paying off a Product Purchase in Instalments
This isn't necessarily the realm of Pinch but in the interest in winning the argument it bears a mention. Buy now pay later companies have absolutely mastered the art of using pre-approved payment agreements to offer retail customers the ability to take home products and pay them off later gradually. Earlier in the year I attended a Klarna function where the Head of APAC Business for Klarna described Australia as the "home of buy now pay later". That just goes to show how conditioned Australians are to agree to automatic payments.
With some courage and creativity you can take advantage of this in your business, no matter what it is.
Posted by Joe McCord on 11 May 2023