Direct debits – why should membership organisations use them?

Many membership organisations run a tight ship when it comes to finances and resources, meaning cash flow and regular income – with minimum fuss – are key. 

Direct debits are a simple and straightforward way for membership organisations to take regular, recurring payments from their members. Automating this process sidesteps the need for an employee to manually issue and chase invoices, and the business can realise a whole host of benefits in the process. 

Here’s everything you need to know about direct debits and why switched-on membership organisations are increasingly using them to create a simple and easy payment method for their members. 

What is a direct debit? 

Many of us will be well accustomed to direct debits in our everyday lives. From gym memberships to insurance policies, household bills to streaming services, direct debit agreements are commonplace. 

The way they work is simple. When you sign up for a service or product, you agree on a price for it. If you choose to pay by direct debit, you give authority for the provider of that product or service to process the payment when it’s due. Usually, this is a recurring payment and when you sign up, you’ll agree how often it will be paid (weekly, fortnightly, monthly, etc.). 

What are the benefits of direct debits for membership organisations? 

For membership organisations, taking membership fees by direct debit can have a number of benefits, including: 

Predictable cash flow 

For any business, having some predictability when it comes to cash flow is important. Staff can be paid, financial commitments honoured, and spending allocated. Direct debits enable that predictability – you’re not waiting on a payment to be made, or wondering whether a payment has been cancelled. A direct debit payment can fail if there aren’t funds available, however, if that happens the member would be notified and the payment would be reattempted days later. Direct debits bring timeliness and predictability, which few other payment methods can, with funds usually received on the day of collection.

Reduced admin burden 

Direct debits are far more ‘admin-light’ than many other payment options. You don’t need to send invoices out, you don’t need to chase missed or late payments. You simply upload your direct debit files to specialised software provided by your direct debit provider – or send your files to your direct debit provider to manage on your behalf. 

Enhanced membership experience 

For members, too, direct debits are hugely beneficial. They don’t need to remember to make a payment which takes one item off their regular to-do list, and it also allows them to spread payments over the course of the year, reducing the financial burden of paying membership fees upfront. For prospective members, that could make all the difference between signing up and not. 

Lower transaction costs 

Direct debits are a cost-effective method of collecting payment, avoiding expensive card transaction fees. 

Increased member retention 

By making membership subscription fees simple and straightforward, you can boost membership retention. Direct debits also offer the possibility of moving away from annual memberships to rolling memberships, removing the ‘will I, won’t I’ decision that usually comes with each renewal period. By making payments easy and simple, you can enhance member experience, and the decision to continue as a member becomes far easier. 

If your membership organisation would like more information about how you can use direct debits to help save time and resources and increase member retention, get in touch with the ClearDebit team today or enquire about our direct debit training.

If you have any questions or need further support, please do not hesitate to contact us. We are here to help you navigate the technicalities of Direct Debit management.