Direct Debit Housekeeping – Top Tips: New Year – New Approach!

The start of a new year is an ideal opportunity to review and if necessary, update your Direct Debit processes. Direct Debits are a safe, reliable, convenient, cheap and trusted method of payment. With a little regular housekeeping, you can ensure that your Direct Debit Processes continue to work efficiently to support your organisation.

Practical Direct Debit housekeeping tips

Here are some practical Direct Debit housekeeping tips to help Service Users stay organised, informed, and confident throughout the year.

1. Ensure the team have access to the latest Direct Debit Rules

The Direct Debit Rules are updated each year by Bacs, part of Pay.UK. They are published in a document called “The Service Users Guide and Rules to the Direct Debit Scheme”. The latest version is version 5.8, dated January 2025. This contains 166 pages of information including rules and best practice recommendations. It is a useful reference tool. Do you have access to a copy?

When updates are made, the table on page 2 provides an overview of what has changed. All Service Users operating a Direct Debit scheme should ensure that they have access to the latest version. The document can be obtained via the Information Hub on the Bacs website (which requires a username and password), or via the sponsoring PSP (bank).

2. Assess your compliance with the Bacs rules – is it time for an audit?

Direct Debit Audits and Process Reviews are the ideal starting point to understand your compliance, security and efficiency when it comes to taking payments. If you are considering a new CRM or finance software; want to grow your Direct Debit volumes; train new staff or reduce failed payments, then you should plan a process review or audit as part of your project management. A thorough Process Review will ensure you best understand the strengths and weaknesses of the existing set-up. It can reveal the housekeeping steps required and suggest where improvements can be made. We offer a range of packages, from running online workshops to a full ‘root and branch review’ with a written report if you would like professional support with this.

3. Ensure PSW is up to date.

Payment Services Website (PSW) is an online resource operated by Bacs, (Part of Pay.UK). Organisations sponsored to use the Direct Debit or Bacs Direct Credit Schemes by their PSP (Payment Service provider / Bank), nominate ‘contacts’ within their organisation. These contacts can then be given access to PSW – either as Primary Security Contacts (PSCs) i.e. the ‘Admins’, or as Additional Security Contacts (ASCs). Contacts can be allocated different permissions (or ‘privileges’). PSW is a useful resource that allows individuals to:

Access Bacs Processing Reports
View information about Payment Submissions
View and maintain information about the organisation.

We encourage all Service Users to ensure their nominated contacts and contact details are kept up to date. This could be part of an off-boarding / on-boarding process for team members. If not, then we recommend organisations undertake Direct Debit housekeeping and check at least once per year to ensure details are still relevant. You can read more about PSW in our related blog.

If you are one of the few Service Users who still post Direct Debit Instructions to the bank, now may be the time to move to AUDDIS. This would mean you could send new Direct Debit Instructions electronically to the bank. This offers numerous advantages. It is quicker, less costly, you get immediate feedback on errors or rejections and allows you to speed up the whole process. It is a one-off project to migrate to AUDDIS and you can read more on our website.

If you are already AUDDIS enabled, are you taking full advantage of the different paperless sign-up methods available? Common sign-up methods include via the internet (web or app), via telephone, face-ot-face or via Electronic Document signature. You can read an overview of these methods and considerations on our website. Generally, the more options you present to customers, the easier it is for them to sign-up to pay you!

5. Review the Suppliers and Automations that you have in place

You may also wish to consider the Suppliers that you work with. Is now the time to compare service levels and prices across different offerings? Good Direct Debit housekeeping would suggest undertaking a regular review, especially as your set-up or team may change over time. Are there ways that you could increase automation, reduce manual input and improve the robustness of your approach? The answer most likely – is yes!

6. Check you are accessing your Bacs reports.

The Bacs rules state that Direct Debit advices, notified via Bacs reports should be applied to the master database within 3 working days of the date the advices are available. They ‘strongly recommend’ that the changes are applied immediately to avoid the risk of misdirected or failed collections. Typically best practice (depending on volume) is to download and action all available reports on a daily basis. This keeps the master data as clean as possible and gives the best opportunity for successful collections. Bacs reports can be accessed via:

your submitting Bacs Approved Bureau
your Bacs Approved software,
Payment Services Website.

Failure to access your Bacs reports or to apply the information contained within, can lead to compliance communications from Pay.UK or your sponsoring PSP (bank). It can also potentially lead to failed collections and/or issues with customers.

7. Check your rates of Unpaid Direct Debits.

Often, a good starting point when considering your Direct Debit process is to look at your failure rate. You can assess this by looking at the volume of Direct Debits submitted and the volume of failures, as advised via the ARUDD report. The failure rate should be fairly low if you have an efficient process. We suggest you consider the following:

Your overall failure rate. You may want to compare your failure rate to the industry average to see if it is in-line.
Failures that are within your control vs failures that are outside of your control. If you have a failure due to ‘2-Payer deceased’ for example, this is outside of your control. If you have a failure for ‘4 – Advance Notice disputed’, or ‘7 – Amount differs’, to some extent, these are within your control. If you have an efficient and compliance Advance Notice process and the payer is aware of the amount being charged, these failures should not arise. If they do, there may be ways to refine the process to prevent future issues
Is the failure temporary or permanent? If temporary, e.g. a failure for ‘0 – refer to payer’, you may choose to automatically re-present the transaction. If ‘permanent’ e.g. a failure for ‘1 – Instruction cancelled’, you will need to lodge a new Direct Debit Instruction before a collection can be successfully attempted again.

Staying on top of failure rates and reason codes as part of regular Direct Debit housekeeping, can keep your processes streamlined and efficient, whilst ensuring the highest success rate possible.

You can sign-up to the Bacs newsletters on the Bacs website. These provide information about Scheme rule updates, bank holidays and other information of note. It is useful for at least one team member to have access.

A Fresh Start for the Year Ahead

Direct Debits are a powerful tool when used efficiently. By staying informed, organised, and compliant with the Rules, Service Users can enjoy all the benefits of this payment method. This new year, take a fresh approach to your Direct Debits. Consider our Direct Debit Tips – and let good financial housekeeping set the tone for a more confident and stress‑free year ahead.

Questions?

If you have questions, remember – we are here to help. Contact us!