How to handle failed Direct Debits like a pro
Direct Debits are an incredibly well-established way for businesses, associations and not-for-profits to collect regular payments from customers – and for customers to make those regular payments without any hassle.
However, that doesn’t mean to say Direct Debits are a foolproof way to collect money.
Direct Debits can fail, and if they do, you’ve got to handle them like a pro!
Here’s everything you need to know about dealing with failed direct debits while maintaining customer trust and protecting your business’s reputation.
Understand why the Direct Debit has failed
Direct Debits may fail for a few reasons, and before acting, it’s important to understand why the failure has occurred.
Some of the common reasons for failed Direct Debits include:
Insufficient funds in the account
A common reason for a failed Direct Debit is that the payer didn’t have enough money to honour the debit.
The account being closed
The payer may have closed the account and not updated the Direct Debit instruction.
Incorrect customer details
Sometimes, an incorrect detail may have been entered – for example, an error may have been made with the sort code or account number.
The bank rejecting the Direct Debit
Sometimes, the bank may reject a Direct Debit. There could be a number of reasons for this, including technical issues or a fraud flag.
Your BACS report should provide you with notification of failure (ARUDD – Automated Return of Unpaid Direct Debit), and an error code for each Direct Debit failure within two working days of the failed collection.
Act quickly
While a failed payment isn’t always a sign that the payer is unwilling to pay, it’s important to
act quickly and promptly. A courtesy email or SMS to inform them that you were unable to take the payment is a good first step.
In this communication, it’s good to advise them of what could happen next. This could be retrying the Direct Debit (read more below before doing so!), making a manual payment, or updating their Direct Debit instruction.
Retry the payment
You can retry the Direct Debit, but timing is important here. The Direct Debit Guarantee requires you to give advanced notice of an attempted collection, so if you are going to re-attempt collection, ensure you give the required notice.
Review your comms
Sometimes – particularly if you’re experiencing regular payment failures – unclear communications may be to blame. Review your communications, both in terms of messaging and delivery time and format, and adjust accordingly. Trial different messaging to see if there’s an uptick in successful payments.
Monitor repeated failures
Regular missed payments indicate bigger problems such as financial difficulty, disengaged customers, instructions that need to be updated or even fraud. Look for patterns by keeping records in your CRM, and take action when you need to.
Stay up to date with compliance rules
To handle failed payments well, you need to be completely up to date with Direct Debit Scheme rules. By ensuring your
Direct Debit training is up to date, you can handle failed payments confidently, and be certain you’re taking the right actions at the right times.
Is your Direct Debit Scheme knowledge up to date? Explore
ClearDebit’s training options and ensure you and your team can handle failed Direct Debits like a pro.
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.
