Paying by direct debit

Direct debit (or automatic debiting) allows to automatically pay invoices that are repetitive in character. The holder of a bank account (debtor) authorises in writing that a creditor may withdraw any amount due from the debtor's account.

In principle, the due dates or amount of a direct debit are not fixed. This means of payment lends itself to modern processing methods, particularly electronic processing.

Objective: it is used to settle (pay) any type of invoice of a repetitive nature for which the amount may vary (telephone, electricity, gas, water bills, etc.).

Who is concerned

Available to the self-employed and any type of business, payment by direct debit applies in the following cases:

  • initial set-up (electricity, water, gas, telephone, etc.);
  • change of office, telephone, electricity suppliers, etc.

Prerequisites

  • both the business authorising the direct debit and the beneficiary must have a bank account;
  • the creditor can only initiate a payment (request payment) if it has a direct debit mandate duly signed by the debtor;
  • SEPA direct debits require the mandatory use of an IBAN (International Bank Account Number) and BIC (Bank Identifier Code) to identify the debtor’s account;
  • the debtor’s bank account must have sufficient funds or have a sufficient credit line for the payment to be made when requested.

How to proceed

Application

Duration

The direct debit is valid until cancelled by the debtor or creditor.

Cancellation/objection

  • cancellation of the direct debit: at any time in writing;
  • objection to a deduction made: possible to oppose a payment.

Payment time frames

The time required to set up a direct debit and the payment time frame vary depending on the bank.

Advantages, disadvantages and risks

Advantages

  • automatic (no intervention required for this means of payment);
  • no need to check whether invoices have been paid or not (subsequent checks can still be carried out);
  • transfer considered to be irrevocable as soon as the ordering customer’s account has been debited, so the debtor cannot undo the transaction;
  • a small discount may be obtained from suppliers since this type of payment generally ensures quick payment.

Disadvantages

  • it is not possible to check the accuracy of the amount which will be debited from one’s account;
  • the terms of payment given to debtors is greatly reduced, since the payment request is generally made a few days after the invoice is drawn up;
  • the direct debit authorisation alone does not confer ownership of the amount in question; the debtor’s account must still have sufficient funds when payment is requested.

Risks

The debtor's account could be debited by an excessive amount and invoices may be disputed.

We are interested in your opinion

Please rate this page :
Last update