Paying by direct debit

A direct debit is used to automatically pay invoices of a repetitive nature. To do this, the holder of a bank account (debtor) authorises a creditor in writing to debit any sum due to the latter from the debtor’s bank 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.

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