SEPA direct debit: make your collections more reliable
Have you ever been caught off guard by a late client payment? Are you struggling to maintain a stable, forecastable financial balance? The SEPA direct debit offers you a practical solution for making your collections more reliable.
SEPA direct debit: definition
A SEPA direct debit (SDD) consists of a debit in euros from the debtor’s bank account, initiated by the creditor, for the amount and on the due date of an invoice. The SEPA direct debit enables you to debit your clients in the 36 member countries of the SEPA area.
This method simplifies recurring transactions between companies and their clients. You save your client the hassle of manually processing each transaction and ensure collection at a set frequency and on a fixed date.
There are two types of SEPA direct debit:
- The classic SEPA Direct Debit, also known as Core. It is used for transactions between individuals or between a company and an individual.
- The SEPA Direct Debit Business to Business (B2B). It is used exclusively for direct debits between companies. It can be used by a company to debit its corporate clients, for example.
Avoid unpaid orders and optimize your cash management!
The SEPA direct debit offers three main benefits for your company.
- It’s all about greater control:
Using SEPA direct debit enables you to ensure that your clients pay their bills at the right time every month, thus avoiding late payments or non-payments. - It’s a time-saver:
With this payment method, you save administrative time on payment processing, dunning and banking reconciliation. - It’s your ticket to optimized treasury management:
Thanks to SEPA direct debit, you no longer have to worry about failed payments due to card expiry, cancellation or loss, for example. You also simplify the setting up of your treasury plan, since you know the exact date on which each invoice will be paid.
In brief, you improve your cash management, optimize your working capital requirements, and maintain a more stable and forecastable financial balance.
How to set up your SEPA direct debits?
In order to set up a SEPA direct debit, a SEPA mandate is required, i.e. a contract by which the debtor authorizes the creditor to request a direct debit from their bank account. The agreement is valid until revoked by the debtor. Once set up, the direct debit will run on a defined schedule.
Here are the steps to follow to set up a SEPA direct debit:
- Ask your bank for your SEPA Creditor Identifier (SCI).
- Create a direct debit mandate and ask your client (the debtor) to sign it. This mandate must include the debtor’s full bank details and direct debit authorization.
- Inform the debtor of the amount and frequency of future direct debits. At least 14 days before the first direct debit is due, you must send the debtor an advance notice.
- Send your direct debit mandate details to your bank. You can use either a SEPA direct debit form provided by the bank, or a direct debit management software application.
- Your bank checks the information on the direct debit mandate and saves it into its system.
- At each due date, your bank will automatically send a direct debit request to the debtor’s bank. The specified amount will be debited from the debtor’s account and credited to your account.
Specific details and procedures may vary depending on your bank and the legislation in force in your country.
Iziago makes it easy to create direct debits
Looking to optimize your direct debit set-up? Thanks to its Direct Debit module the Iziago software can easily create your remittances and generate files to send to the bank. In addition to the SEPA format, the ISO 20022 format is available in the module, enabling you to debit your clients worldwide.
Once your direct debit file is ready, Iziago connects to your bank’s website so that you can save it there.
To optimize your day-to-day use, the Direct Debit module enables you to save and reuse templates for recurring direct debit remittances (subscriptions, rents, royalties, etc.). For each collection, you specify the month in which the direct debit begins and ends. You may also import an order file in text format with separators, and our software will convert it into a SEPA direct debit file.
To keep track of all your actions, Iziago provides you with a history of your direct debits sent to the bank. Thanks to Iziago, you can debit your clients quickly and easily.