What Are The Benefits Of Direct Debits?

By Arnab Dey

January 28, 2022

Direct Debits

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For businesses today, especially SMEs, cash flow is a major concern. The 1.25 percentage point increase to National Insurance and dividend tax rates present a new challenge, on top of growing costs across industries.

As such, understanding how to properly manage cash flow is of great importance – and direct debits represent the best way for businesses to do so.

But what exactly is a direct debit? In essence, a direct debit is a scheduled, automated, and often regular transfer of money from one account to another.

It is a method of payment that will be intimately familiar to those responsible for household utility bills and council tax, being the most common form of payment for bills.

3 Advantages Of Using Direct Debits

More accurately, direct debits are a form of permission: you allow provider permission to request a certain amount of money from your account, via your bank, on a pre-arranged date. This is how variable energy bills get paid automatically.

Direct debits are not to be confused with the standing order, which is a different form of automated payment wherein you order your bank to pay a pre-arranged sum to another account on a regular date.

Direct debits have a number of incredibly useful applications for businesses, whether dealing with B2B or B2C payments – the best of which are explained below.

1. Improves Cash Flow

Direct Debits

One of the key benefits conferred by using direct debits, both to pay suppliers and to receive payment for regular business, is in the form of your business’ cash flow.

Scheduled payments in and out give you an incredibly clear image of your financial situation, enabling you to know exactly how much you have at what time.

This means you can plan big expenditures around your regular income and outgoings, preventing any business accounts from unexpectedly going in the red. The business cash flow is essential. Even when you are maintaining a good accounts record, there is always a chance of cash fall. And you even know when your account cash is going under the red line.

2. Retains Customers

Direct Debits

Another main benefit to utilizing direct debits is the ease with which customers can continue to use your service or product. Direct debits reduce the amount of administration required for sale on both sides of the transaction.

Now everyone is busy, and they do not want to wait for the transitions. The direct debit method is fast, creating an excellent impression among the customers.

Even if you are relatively new as a business and unaccustomed to the process, direct debit gateways exist to streamline the process for both you and your customer – giving you access to seamless transacting.

Direct debit is a set-and-forget process for customers, which will keep them happy and disincentivize them from moving to a competitor as a result.

3. A Cost-Effective Method

Lastly, direct debits are extremely cheap for businesses to run. Debit and credit card transactions often come with relatively hefty fees; depending on your payment solution provider, you could be losing up to 3% of each transaction to merchant fees alone.

Direct debit transaction fees are lower, and hidden costs from chargebacks and start-up expenditure are negligible.

Direct debits are a direct cash withdrawal method. With this transactional method, one person can directly withdraw some amount of money directly from other people’s accounts.

This method is a fast and cost-effective solution for business financial transactions.

For recurring payments, credit cards, and utility bills, this method is used. When the payment amount varies from one to another, the direct debits methods are used for fund transfer.


Direct debits methods are fast and secure. For every business handler, this fast process is a big benefit. You do not have to wait for hours. With simply one or two clicks, you can complete your fund transfer.

And all of these three advantages are most convenient for every business handler. Are you currently a direct debit account holder? Do not forget to share your opinion in the comment section.

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Arnab Dey

Arnab is a passionate blogger. He shares sentient blogs on topics like current affairs, business, lifestyle, health, etc. To get more of his contributions, follow Smart Business Daily.

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