- ARUD, AUDDIS, DDI, Direct Debit, direct debit instruction
- 03, NOV 2017
Our Guide to Setting up Direct Debit Instructions
With Direct Debit being a widely trusted payment method, customers are increasingly opting to use the scheme. For businesses keen to sign up new customers, knowing where to start and how the process of setting up direct debit works is key. To give you a more comprehensive understanding of the procedures and timescales involved, here’s the Clear Direct Debit guide.
Setting up direct debit
The process begins with a Direct Debit Instruction (DDI). Also sometimes known as a Direct Debit Mandate, a DDI is an agreement between your customer and their bank (and not, as some people think, between you and your customer). There are three main ways a DDI can be completed, depending upon your / the customers preference and the status of your Service User Number (SUN):
- In writing – the customer fills in a Direct Debit Instruction form and forwards it to you.
- Online – the customer completes a bank-approved online form.
- By phone – the information is collected over the phone by a company representative, using a bank-approved script.
While paper DDIs are available to all organisations using direct debit, taking the authority to collect a Direct Debit can only be completed online or via the phone if your organisation has a SUN which is approved for paperless Direct Debit – add a link to paperless pages on web here
Once the DDI is completed, lodgement can be done in one of two ways: Paper Lodgement or via AUDDIS (Automated Direct Debit Instruction Service) Lodgement.
Paper (or non-AUDDIS) Lodgement
This is the traditional method of lodgement used by non-AUDDIS enabled service users and works as follows:
- The customer posts the paper Direct Debit Instruction to your organisation.
- You record the DDI information on your own systems and post the paper DDI on to the customer’s bank for processing. You must lodge the DDI with the bank within 6 months of the date of the customer’s signature.
- The DDI is lodged against the customer’s bank account and registered as a single authority given by the payer for you to collect payment.
If there are problems setting up the Direct Debit, no automatic report is generated – the first you will know of it is when the collection has failed.
AUDDIS (Electronic) Lodgement
Established in 1996, AUDDIS allows organisations to transfer new Direct Debit Instructions electronically via the Bacs service, either directly to the customer’s bank or indirectly, via a bureau like Clear Direct Debit. New service users who submit directly to Bacs will typically be issued with an AUDDIS service user number.
AUDDIS Lodgement involves the following processes:
- The customer provides their authority for the direct debit – this could be in a paper DDI, an online form or over the phone – and returns it to your organisation.
- The organisation stores the original / scanned copy of the DDI (if a paper DDI is completed) or records the DDI authority if provided electronically or over the phone.
- The details of the DDI are entered into your organisation’s finance/CRM system.
- You submit the authority provided in the DDI to the customer’s bank electronically, either directly to Bacs or via a Direct Debit Bureau.
- The organisation or bureau must reconcile any submission errors detailed in the Input report.
- The authority is then forwarded to the customer’s bank for lodgement against the customers account.
- If the bank is unable to lodge the authority, an AUDDIS report advising of the reason is generated.
- You (or your bureau) must collect and reconcile the AUDDIS report within 3 working days.
The Lodgement Cycle:
The timeline for lodging a new DDI via AUDDIS is as follows:
Day1: Transmission – the organisation or bureau submits thenew DDI transaction code to Bacs.
Day 2: Processing – files are sent to the bank for processing.
Day 3: Lodgement – DDI becomes live enabling future collections to occur.
Please note: if there is an issue with the customer’s bank account (incorrect sort code, for example) the cycle may be extended while the error is rectified.
When using AUDDIS it’s considered good practice to wait at least 5 days to ensure that the DDI is lodged and there is time to receive any bacs reports detailing errors that will need to be actioned.
For paper DDI, the timeline is extended as extra time for postage, manual administration and error correction must be incorporated. The guidelines recommend waiting at least 10 working days before attempting collection.
Giving the Customer Advance Notice
An important element of setting up a new DDI is giving the customer Advance Notice of the Direct Debit to be collected. This is one of the main protections afforded by the Direct Debit Guarantee and can be done in writing, electronically or orally (with written or electronic notice, your sponsor bank will need to approve your formats to ensure they are Scheme compliant). Although permitted, oral Advance Notice is probably best avoided.
The default timescale for Advance Notice is 10 working days prior to the collection date, although this can be reduced in agreement with your bank.
Expert Guidance from Clear Direct Debit
There are a number of practical ways in which Clear Direct Debit can help your business get to grips with Direct Debit Instructions:
· For businesses who already submit DDIs directly to Bacs or are considering managing their own Direct Debits, we can help resolve any problems you are having, improve efficiency or help you get started with our consultancy service and AUDDIS training.
· For those who want to migrate from paper-based Direct Debits to AUDDIS, we have the expertise to effect a smooth transition.
· For organisations who no longer have the capacity to self-manage Direct Debits or who would like to outsource to a bureau from the outset, we can make life easier and deal with every aspect on your behalf.
Whether you fit into the above categories or simply need a bit of friendly advice, the Clear Direct Debit team are ready and waiting – just get in touch to see how we could help!