How To Avoid Late Payments for Direct Debits

It’s the end of a productive month, and you’re waiting for the payments to start rolling in, however, there is a serious hitch in the system. If your business relies on automatic monthly payments for services, such as a subscription box, then late or missed payments can directly affect your cashflow. Each time a customer has to retry a direct debit payment, they re-engage with the process of valuing your services. They ultimately may choose to end their relationship with your company.

Potential Reasons For Direct Debit Failures

There are a myriad of causes that could result in a direct debit not being processed on a client’s account. However, the most reliable reasons include an inadequate amount of funds in their bank account, or your client may have instructed their bank to cancel the scheduled debit order. A far rarer reason could be that the customer supplied you with inaccurate bank account details by accident, or their account details may have changed.

If the transaction returned with the message “Refer to payer“, this would typically suggest that the customer’s bank balance was lower than the total of the bill. This is generally the main cause of non-viable transactions for subscription and membership services. Good ways to successfully deal with this issue would be to either re-attempt the transaction, or contact the client and set-up a new date for the debit order.

Ways To Alleviate The Churn After A Direct Debit

The first step would be to ensure that shortly after the debit order has bounced, your internal messaging system sends out a quick reminder to the consumer regarding their impending debit payment. The longer it takes to get the message to the consumer, the greater the chances that the consumer will instead choose to cancel their services with you.

The second step would be to ensure that clients have access to a secure online page, where they can update banking details or follow steps on a landing page to choose their new debit order date. Many people do not enjoy calling into a call center for assistance.

Something else pretty cool about Pay Advantage is you can set up automated actions that happen on late payments, things such as setting it to re-debit in 3 days to a week, setting the direct debit to paused until the situation is sorted out with the customer, etc. The purpose of this is to help customers and merchants stop late fees from piling up.

Also automated email reminders and receipts to keep customers updated as payments fail / succeed.

Finally, it is important to consider that if it is your client’s very first infraction with payments, that perhaps you could waive charging them a penalty. This may foster a more positive outlook for the customer towards your business and therefore, increase the likelihood that they will continue to engage with your business in the future.

Failed Direct Debit payments can have a significant negative impact on the success of your business if not managed effectively. This is why clear communication with your customers could be pivotal in a long-term strategy. 

Have you ever experienced direct debit order payment failures and have had no idea of where to look or what to do? Then it may be time to check out our platform and look at how our effortless direct debits could change the game for your business.