Which payment method is better for your charity or membership organisation: Standing Order or Direct Debit?
When it comes to receiving payments from members or donors, should you ask them to pay by Standing Order or Direct Debit? The answer is simple: Direct Debit is a more efficient and secure payment method that offers clear advantages to both the organisation and the individual. Here are some reasons why you should consider Direct Debit for your charity or membership organisation.
Understanding the difference between Standing Orders and Direct Debits
Standing Orders are initiated by the payer's bank on behalf of the payer for a fixed amount on a fixed date. Donors/members are often familiar with this type of payment method and are comfortable with it as they have complete control over the payment. Direct Debits, on the other hand, are a more convenient and secure payment method that offers several benefits to both the organisation and the individual.
The benefits of Direct Debits over Standing Orders
1. Direct Debit payments are covered by the Direct Debit Guarantee
Direct Debit payments are covered by the Direct Debit Guarantee, which means that if any errors are made, the member/donor can reclaim their money. If payments are made into an incorrect account via Standing Order, however, there is no such guarantee.
2. Greater control for organisations
With Direct Debits, the organisation controls the amount that is paid, whereas, with Standing Orders, the individual controls the amount. This means that if membership fees increase, for example, and payment is being made via Direct Debit, the organisation can increase/decrease the amount after providing advance notice. If payment is made via Standing Order, the organisation will be reliant on the individual updating the Standing Order.
3. Varying amounts can be collected
Direct Debits allow for varying amounts to be collected, which is not the case with Standing Orders. This means that if a member accesses different services at different times, all the monies can be collected via Direct Debit, be it an annual fee, a one-off event subscription, goods and services, etc. With Standing Orders, the individual will need to create different Standing Orders for each item if the amounts vary.
4. Control over the payment date and reference
With Direct Debits, the organisation controls the date that payment is made and the reference used for the payment. The organisation can allocate a meaningful reference to each donor/member, whereas with Standing Orders, an individual may not use reference text that is easy for the organisation to understand. This can make it difficult to track who has actually paid.
5. Bacs reports keep you informed
With Direct Debits, the organisation receives Bacs reports to keep them informed about their payments. This is not the case with Standing Orders. If an individual decides to cancel a Direct Debit, for example, with their bank and not inform the organisation directly, the organisation will still be alerted to this via Bacs reports. With Standing Orders, the first clue is when income is reduced, and it takes time to track down who has cancelled and why.
Switch to Direct Debits for your charity or membership organisation
If your charity or membership organisation still has lots of customers using Standing Orders, it might be time to consider moving them onto Direct Debits. It would also be worthwhile to investigate Direct Debits as a payment method for new donors/members.
If you would like to learn more about the differences between Standing Orders and Direct Debits and how Direct Debits can benefit your organisation, please contact us for information and help.
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