Direct Debits and Standing Orders are familiar terms for those who continue to live in the business environment today. As an entrepreneur, you may also look for some simple payment solutions like the said ones to make payments every month but are not sure which one is the most suitable for your specific situation. It calls for knowing everything that falls into these payment solutions. Generally, both the methods are the same but do have some distinct features as well. So, what is the difference between a standing order and a direct debit?
The two payment solutions do the same job that they are instructions to the bank that enable payment making on regularly to your business account. Both allow you to allow an amount to be sent from your account to another account regularly.
Although a standing order is a relatively simple choice for a business account holder, it associates several issues that may render it unsuitable to some companies. For example, you cannot change the payment amount without having to cancel the existing instruction and set up a new one. An unpaid standing order can take up to a month before you get a notification from your bank informing you that you have still some unmade payments. In this case, it will impact on the administration and the cash flow of your business.
Direct Debits are suitable for small businesses. You may set up one for you if you need to change your payment amounts often and want automatic notifications for the transactions. They also do not need any extra paperwork. This payment method provides your clients with the opportunity to be flexible in their payment terms. In case of an incorrect transaction in Direct Debit, the bank allows you to find out where the amount has been debited and subsequently credit it back to your account.