Help: How to Take Payments as Direct Debits?

[roadsweeper]

My business has a lot of contracts where clients pay monthly and it can be a pain chasing non-payment, etc. for these recurring costs. We currently use Standing Orders but with the VAT rate changes and the fact that the amounts can vary as clients change their service, they are proving to be more trouble then they're worth.

We bank with HSBC and they want quite a lot of money to enable our account for Direct Debits (below) - can anyone provide any information on our options and the most cost-effective approach? I don't even know what some of the charges described below (e.g. BACS File Charge, Smart Card Charge) are for?!

HSBC said:

Customer must be sponsored by HSBC

Customer must have bacs approved software or may use an approved bureau to collect their payments
If the customer wishes to research this themselves they can search on the internet under payment bureaus or visit the bacs website who will list current approved software resellers or approved bureaus.

After completion of paperwork for Bacs & AUDDIS status the customer is issued with an originator identification number.
The customer must then provide us with a sample direct debit instruction and letter of advance notice
The customer may then arrange for the software to be installed or if using a bureau arrange for their account to be linked to their originator number
Test files must then be sent
The customer will then be advised of a live date
The whole setup process can take up to 8 weeks before collections can then be made

Costs

If customers want HSBC to source their software then we use Bottomline Technologies. Purchase costs are as follows

Bacs IP software £1100 + Vat
Training & Installation £400 + Vat
Annual Licence fee £240 + Vat

If the customer does not want to purchase the software they can use Bottomline's bureau service, this means that they upload their payment instructions via the internet to their account with the bureau

Setup charge £499 + Vat
Template charge £99 + Vat
Monthly Account charge £45 + Vat
Transaction charges 14p per item

As well as the software or bureau costs HSBC's charges are as follows;

Sponsorship charge (one off) £275 + Vat
Bacs file charge £5 per file
Bacs item charge 9p per item collected
Smart card charge (min 2) £25 + Vat per card

Thanks in advance!

[john_p]

I've not used them, but a few of my suppliers use Eazipay. It's not ideal as it's "Eazipay / You Ltd" but only £400 setup and 40p per transaction is a lot better than the pricing you've got there.

[roadsweeper]

Thanks for that John, I've had a look at their website and will bear them in mind.

Does anyone understand the charges HSBC have outlined - for example, what is a smart card in this context?

[playerone]

Eazipay would reduce the set up fee considerably with a bit of pushing by the way.....

When we were looking they were the most professional to deal with.

[siscar]

Direct Debit :-) one of my specialist subjects!

HSBC said:

Customer must be sponsored by HSBC

Yes and HSBC (or any bank) won't do it unless you have a significant history with them. So if you are relatively small or not going to do much of this you may be better using a bureau

HSBC said:

Customer must have bacs approved software or may use an approved bureau to collect their payments
If the customer wishes to research this themselves they can search on the internet under payment bureaus or visit the bacs website who will list current approved software resellers or approved bureaus.

There are a number of packages that do this, Bottomline are one of the big suppliers, Albany is another. What these products do is to take data that other software has prepared and send it to BACS (which is called VOCA these days).

HSBC said:

After completion of paperwork for Bacs & AUDDIS status the customer is issued with an originator identification number.
The customer must then provide us with a sample direct debit instruction and letter of advance notice
The customer may then arrange for the software to be installed or if using a bureau arrange for their account to be linked to their originator number
Test files must then be sent
The customer will then be advised of a live date
The whole setup process can take up to 8 weeks before collections can then be made

Yes there is a lot of messing about, AUDDIS is the service that allows you to submit new instructions to them electronically. The bank will want to see the forms, they need to be designed exactly according to the regulations then the bank will make you change them just for the hell of it.

HSBC said:

Costs

If customers want HSBC to source their software then we use Bottomline Technologies. Purchase costs are as follows

Bacs IP software £1100 + Vat
Training & Installation £400 + Vat
Annual Licence fee £240 + Vat

This is the cost of their WinBACS software that does the communication with VOCA. So £1500 as a one off then £240 a year

HSBC said:

If the customer does not want to purchase the software they can use Bottomline's bureau service, this means that they upload their payment instructions via the internet to their account with the bureau

Setup charge £499 + Vat
Template charge £99 + Vat
Monthly Account charge £45 + Vat
Transaction charges 14p per item

So you would be forming your data into a file (txt or similar) that would include all the customer's bank details and the amount, you would load it up to them and they would submit it for you. £598 to set it up and then £540 a year plus 14p for every transaction

HSBC said:

As well as the software or bureau costs HSBC's charges are as follows;

Sponsorship charge (one off) £275 + Vat
Bacs file charge £5 per file
Bacs item charge 9p per item collected
Smart card charge (min 2) £25 + Vat per card

So you will be paying £325 to setup then £5 a file and 9p an item.

So option 1 is to get the software and submit stuff yourself - £1825 for all the setup then £5 every time you do a run (most people do one a month so £60). Then 9p for every DD you collect and £240 for annual license)

Option 2 is the bureau - £923 for the setup, £5 every time you do a run, 23p for every item you collect and £540 a year Account charge.

(Smart card is a security device).

Aside from the costs there a rules to follow, for example you need to submit the DD at least 5 days before you claim on it, you have to write to the customer telling them of the amounts and dates and giving them the enough time to cancel before you collect.

[DustyMunchkin]

I know this is a fairly old forum but I'm with Lloyds. In their online banking options you get 'set up direct debit'
Can't believe Lloyds are the only ones together enough to have that so might help others