How to handle failed Direct Debits like a pro

June 4, 2025

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.

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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 .