Many businesses have no idea of the advantages of using a debit order service to collect funds from their debtors, let alone which debit order solution will be the ideal for their requirements.
Having taken care of many businesses payment collection strategies Let me try and explain why you must be utilizing debit order as best payment collection method for your organization as well as which debit order process is going to be ideal to your industry and kind of client base.
Lets start looking into what a debit order is:
A debit order is an instruction that the bank or credit card account holder provides a enterprise to recover funds straight from their personal account. They method by which a customer provides this instruction is by performing a written or verbal (generally telephonic) debit order mandate.
A debit order, as we label it in South Africa, may be known as the direct debit in several areas of the world. To learn more about direct debits please see the appropriate Wikipedia website.
In South Africa there are actually commonly 2 kinds of debit order. Electronic Funds Transfer (EFT) and Early Debit Order (EDO) which can further be broken into Authenticated Early Debit Order (AEDO) as well as Non-authenticated Early Debit Order (NAEDO). EFT debit orders follow EDO debit orders when processed using the standard bank debit order runs. Both AEDO and NAEDO debit orders run in a randomised manner before EFT debit orders and allow collectors an identical chance to collect funds from their consumers.
NAEDO debit orders were launched in 2008 because of a National Credit Act initiative and permit loan providers to collect as much as R5,000.00 through the most fair way achievable. It is important to note that normal EFT debit orders make provision for collecting anywhere up to R500,000.00 per debit instruction.
EFTs are in general more affordable than AEDOs and NAEDOs but do not include the ability to track a client account/credit card for up to 32 days. If monies were to get to the account within the tracking period, these funds could be restricted for collection by the party initiating the debit.
Some brief illustrations to explain where EFT and NAEDO debit order collections could be used:
1. An investment corporation desiring to collect an additional payment from one of their investors would almost certainly make use of an EFT debit order on the grounds that the possibility of the client having available funds for collection is particularly high. The total to be collected would also often times go over the R5,000.00 NAEDO limit and cost of the collection might be a consideration.
2. Insurance brokerages acquiring a monthly payment from one of their clientele for funeral cover might be best off making use of a NAEDO debit order run. The probability of this customer having available funds is rather low and tracking will probably be useful to monitor the clients account for when funds do turn up (normally their monthly wage).
Almost any micro lender would be best off using NAEDO as they deal with clients who normally do not have money available inside their accounts especially around the standard debit collection dates. This is quite obvious as these individuals probably have a record of seeking credit and might have numerous debit orders to various creditors going off on the same day. It's because of this that the randomisation of NAEDO transactions may become a major benefit to make sure each creditor has got an equal possibility of being paid.
On the flip side any service provider will almost certainly choose EFT as their favored debit order solution since they maintain some type of power over their customer by means of ending/suspending service in order to obtain payment. Service providers also usually do not offer any credit conditions and payment is done on a regular monthly basis.
I realise there are plenty of occasions and border cases which may warrant a service provider or creditor opting to make use of either EFT or EDO debit orders and definitely will look into these situations in depth during my next blog post.
Having taken care of many businesses payment collection strategies Let me try and explain why you must be utilizing debit order as best payment collection method for your organization as well as which debit order process is going to be ideal to your industry and kind of client base.
Lets start looking into what a debit order is:
A debit order is an instruction that the bank or credit card account holder provides a enterprise to recover funds straight from their personal account. They method by which a customer provides this instruction is by performing a written or verbal (generally telephonic) debit order mandate.
A debit order, as we label it in South Africa, may be known as the direct debit in several areas of the world. To learn more about direct debits please see the appropriate Wikipedia website.
In South Africa there are actually commonly 2 kinds of debit order. Electronic Funds Transfer (EFT) and Early Debit Order (EDO) which can further be broken into Authenticated Early Debit Order (AEDO) as well as Non-authenticated Early Debit Order (NAEDO). EFT debit orders follow EDO debit orders when processed using the standard bank debit order runs. Both AEDO and NAEDO debit orders run in a randomised manner before EFT debit orders and allow collectors an identical chance to collect funds from their consumers.
NAEDO debit orders were launched in 2008 because of a National Credit Act initiative and permit loan providers to collect as much as R5,000.00 through the most fair way achievable. It is important to note that normal EFT debit orders make provision for collecting anywhere up to R500,000.00 per debit instruction.
EFTs are in general more affordable than AEDOs and NAEDOs but do not include the ability to track a client account/credit card for up to 32 days. If monies were to get to the account within the tracking period, these funds could be restricted for collection by the party initiating the debit.
Some brief illustrations to explain where EFT and NAEDO debit order collections could be used:
1. An investment corporation desiring to collect an additional payment from one of their investors would almost certainly make use of an EFT debit order on the grounds that the possibility of the client having available funds for collection is particularly high. The total to be collected would also often times go over the R5,000.00 NAEDO limit and cost of the collection might be a consideration.
2. Insurance brokerages acquiring a monthly payment from one of their clientele for funeral cover might be best off making use of a NAEDO debit order run. The probability of this customer having available funds is rather low and tracking will probably be useful to monitor the clients account for when funds do turn up (normally their monthly wage).
Almost any micro lender would be best off using NAEDO as they deal with clients who normally do not have money available inside their accounts especially around the standard debit collection dates. This is quite obvious as these individuals probably have a record of seeking credit and might have numerous debit orders to various creditors going off on the same day. It's because of this that the randomisation of NAEDO transactions may become a major benefit to make sure each creditor has got an equal possibility of being paid.
On the flip side any service provider will almost certainly choose EFT as their favored debit order solution since they maintain some type of power over their customer by means of ending/suspending service in order to obtain payment. Service providers also usually do not offer any credit conditions and payment is done on a regular monthly basis.
I realise there are plenty of occasions and border cases which may warrant a service provider or creditor opting to make use of either EFT or EDO debit orders and definitely will look into these situations in depth during my next blog post.
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Before choosing direct debit collections, be sure to check Steven Isaacs excellent resources on the best naedo system available for your business.
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