Direct Debit – avoid the disruption of returned payments

In our recent blog on BACS reports, we mentioned the ARUDD report – the Automatic Return of Direct Debit report – which lists any direct debit transactions which could not be completed. A direct debit transaction which fails means a dip in your cashflow and extra administrative effort to find out what has happened. We’re here to help you avoid the disruption of returned payments.

Why are payments returned?

There are a number of reasons why payments are returned. The ARUDD report uses reason codes to help you identify why a payment has failed, so you can take appropriate action.

The reasons the ARUDD report will use are as follows:

• Refer to payer
• Instruction cancelled
• Payer deceased
• Account transferred
• Advance notice disputed
• No account
• No Instruction
• Amount differs
• Amount not yet due
• Presentation overdue
• Service user differs
• Account closed

Refer to Payer

One of the reason codes noted above is ‘Refer to Payer’ which means that you will need to contact your customer to find out what has happened. It may mean that there were insufficient funds in the bank account to complete the transaction but this cannot be assumed.  In these circumstances, you should contact your customer and try and arrange to retry the payment, first ensuring that there will be sufficient funds in the account to avoid bank charges.

Instructions Cancelled

Instruction Cancelled is another common reason for returned payments. A customer can cancel a direct debit with their bank without advising you, as the Service User, that they have done so. This is a vital part of the Direct Debit Guarantee which supports customer confidence in the direct debit system. However, it can cause issues for you as a Service User if the customer has not also advised you of the cancellation. Cancellations are notified to Service Users in the ADDACS report, so it’s worth making sure your organisation keeps on top of these reports.

Safeguard your payments

If you are regularly experiencing returned payments, take note of the reason codes and see if there is a pattern. You may identify a recurring problem within your organisation which could be ironed out by training.

Allowing a degree of flexibility over payment dates, so your customer can choose a date when they can guarantee funds will be available, will go a long way to ensuring that you experience fewer returned payments for this reason. Reducing your ‘Refer to Payer’ returned payments will ease your administrative burden considerably.

Taking a holistic approach to your BACS reports will help avoid returned payments resulting from cancelled direct debit instructions. You will be notified of cancelled direct debit instructions in the ADDACS report – Automated Direct Debit Amendments and Cancellations report. If you reference this report before taking payments, you should reduce the number of returned payments arising because a direct debit instruction has been cancelled.

How Clear Direct Debit can help

Clear Direct Debit is an established, BACS accredited training provider and direct debit bureau. We can help you ensure your staff are up to date with all aspects of the direct debit scheme, including how to understand and use the direct debit reports, through our training provision . We can also manage direct debit collections for you, should you wish.

Get in touch today and find out more about how we can help you manage your direct debit solutions!