What is a direct debit?
A standing order is an instruction to a bank to allow another organisation to collect varying amounts from a bank account following advance notice of the amounts and dates the money will be collected.
They are useful when a business makes regular payments to another organisation but where the amounts can change from one period to another.
As this gives considerable power to those organisations who claim and receive money using direct debits there are rules in place to ensure that they do not abuse their power. These safeguards are available under the Direct Debit Guarantee Scheme and state that the a business should receive notification of the dates payment will be made as well as the amount to be paid. This provides the business with time to inform the bank and/or organisation of any errors in the amount or date of payment. In addition, if an error is made, the business has the right to an immediate refund.
Direct Debit mandate forms
An example of a direct debit mandate form is shown below.
When will a debit debit leave the bank account?
Direct debits will leave the bank account on the payment dates as notified by the supplier to whom the direct debit is made and will arrive in the supplier’s bank account on the same day. Where this date falls on a weekend or bank holiday, the payment will leave the bank account on the next working day.