Standing Order or Direct Debit?
Standing Order
A standing order is originated from the person/company making the payments ‘the account holder’. The account holders bank set up the instructions on the standing order mandate, as requested by the account holder. The payments are then sent to the bank of the supplier that supplied the goods/service. Only the account holder can change the standing order instructions.
The payments are only made if there are sufficient funds in the account. Payments cannot be backdated. If a payment is missed, the standing order will still operate at the next payment date. A bank will usually accept and set up all standing order mandates on their system.
Direct Debit
A direct debit is originated by the supplier that supplied the goods/service, through the BACS system (Banker’s Automated Clearing Services) the customer having signed the direct debit. The direct debit instructions are usually of a variable amount (this allows the supplier to alter the payments inline with the customers increase/decrease in business). If a payment is missed, the supplier can request the missed payment on a number of occasions. If the payments are continually missed over a period of time, the customers bank will cancel the direct debit.
The customer pays a significant transaction fee when payments are missed: fees are also charged for every occasion that the supplier requests a missed payment (this adds up very quickly). If you have a cash flow problem, you should analyse your direct debits. Banks will refuse a direct debit on poor customer accounts (they will accept, usually, a standing order mandate).
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