Top 3 reasons why not-for-profits should choose direct debit
If you're looking to accept recurring donations as a not-for-profit (NFP) or charitable organisation, direct debit is the way to go.
Are you considering accepting direct debits for your organisation?
If you're wondering how direct debits work, we're here to help.
In this article, you'll learn:
- What direct debits are and how they work
- 3 top advantages of using direct debits, especially for NFPs
- how to get started with direct debits - in less than 30 minutes
What are direct debits?
A direct debit (also known as a ‘pre-authorised payment’) is an instruction from your donor or customer’s bank to pay your organisation.
Your customer signs an authority that enables you to have direct control over payment for your products or services.
You can establish the timing, amount, and frequency of when you receive payment.
Across Australia and New Zealand, there are three main types of direct debits:
- Recurring payments
You receive payments for a fixed amount, every month, indefinitely (or until the payments are cancelled).
- Instalment payments
You receive payment for a certain amount every month until the total sum is paid off.
For example, if a customer owes you a total sum of $300, you could organise it so that they pay an instalment of $50 every month for six months (excluding interest) until they’ve paid the full $300.
- Per invoice or variable
With these types of payments, you receive different amounts at different dates. One month, you may receive $20 in payment; in another month, you may receive $100.
In any case, direct debit requires that both parties agree to the amount before the bank can make the transaction. Once both parties have reached an agreement, the fund is deducted automatically from their bank account.
So, why is direct debit the best choice for NFPs and charitable organisations?
1. It's the safest and most cost-effective option for subscription payments.
Compared to credit card payments, direct debit is the safest way to handle subscriptions and recurring fees, since there are no more risks of late payments.
And how much does it cost to get started with direct debiting? Payment processing fees can vary between different service providers, so make sure you do your research for any hidden fees.
2. It’s more affordable than credit card payments.
With credit and debit card payments, there’s always a small fee you must pay with every transaction – typically between 2-3% of the total donation amount.
To put into context, if you receive a donation of $50, you miss out on $1.5 dollars to that credit card transaction alone – just in processing fees.
Multiply that by the number of donations your NFP receives and it’s actually a significant amount of money lost.
By contrast, direct debit offers unique and competitive pricing options for NFPs.
3. There are fewer administrative costs involved.
Occasionally, your donor or customer payment may not register. This might be because of insufficient funds on their account or a technological error.
When this happens, finding the problem involves manual and sometimes laborious searching through databases. That’s a lot of time and manual effort to find a single transaction that didn’t register.
And even after you’ve found the non-registered payment, you still need to identify the cause of the problem. This could take even more time.
With direct debit, if a payment should fail, our seriously smart system will retry automatically for you – up to 7 times.
What this means for you:
- a higher chance of receiving funds, seamlessly
- less delays and less hassle for you and your donors
- no more extra charges for late payments.
Plus, if a payment has or has not been made – you’ll be the first to know, and our dedicated support team is ready to help you.
Above all, using the Flo2Cash payments engine has seen real positive results for NFPs like you.
Ready to get started?
Set up intelligent payment plans while keeping your fees low.
Unlike other services, Flo2Cash offers both direct debit and credit card payments. We’ll handle everything you need to get started.
From automating your payment process to creating a plan that fits your business model – we’ve got you covered.
Talk to our team today to find out more.
Direct debit | Recurring payments | Not-for-profits | Donations