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Finding the right debit order solution for your organization

by Tim Smart

Many companies are not aware of the key benefits of employing a debit order service to acquire money from their customers, much less which debit order system is the best for their requirements.

Having dealt with many companies payment collection procedures I will attempt to clarify why you need to be utilising debit order as preferred payment collection method for your enterprise as well as which debit order method is most suitable to your sector and kind of customer base.

Lets start with what a debit order is:

A debit order is an instruction that a banking account or even bank card holder provides a business to acquire money straight from their bank account. The procedure by which a client provides this particular instruction is simply by filling out a written or verbal (ordinarily telephonic) debit order mandate. Electronically signed mandates may become a possibility later on as PASA is investigating their usage.

A debit order, like we talk about it in South Africa, may be known as a direct debit in several areas of the world. For more resources on direct debits please see the appropriate Wikipedia page.

In South Africa you can get typically two kinds of debit order. Electronic Funds Transfer (EFT) and Early Debit Order (EDO) which can additionally be broken into Authenticated Early Debit Order (AEDO) and also Non-authenticated Early Debit Order (NAEDO).

EFT debit orders follow EDO debit orders when processed via the standard banking debit order runs. Both AEDO and NAEDO debit orders run in a very randomised fashion ahead of EFT debit orders and allow creditors an identical opportunity to collect funds from their debtors.

NAEDO debit orders were created in 2006 as a result of National Credit Act initiative and allow creditors to collect as much as R5,000.00 in the most fair fashion conceivable.

You should realize that normal EFT debit orders make provision for acquiring up to R500,000.00 per debit instruction.

EFTs are often less costly than AEDOs and NAEDOs but do not include the ability to monitor customers account/credit card for as many as 32 days. If funds were to arrive in the account within the tracking period, these kind of funds can be available for collection from the person initiating the debit.

Some simple cases to clarify where EFT and NAEDO debit order collections can be used:

1. An investment company planning to collect an additional payment from one of their investors would most definitely use an EFT debit order because the possibilities of the investor having available funds for collection is rather high. The amount to get collected might also many times go beyond the R5,000.00 NAEDO restriction and price associated with the collection would be a consideration.

2. Insurance agents collecting a monthly premium from one of their customers for funeral insurance would be better off utilizing a NAEDO debit order run. The odds of this customer having funds available is pretty low and monitoring will likely be useful to keep tabs on the customers bank account for whenever cash do show up (typically their monthly salary).

Any micro loan provider would be best off making use of NAEDO as they contend with clients who tend not to have funds available inside their bank accounts especially around the ordinary debit collection days. This is fairly evident since these consumers would've a history of seeking credit and may have many debit orders to several collectors going off on the same day. It's because of this that the randomisation of NAEDO transactions can be a major advantage of ensure each creditor has an identical chance of being paid back.

On the other hand just about any company will likely pick EFT for their desired debit order method since they retain some kind of leveraging over their client by means of ending/suspending service so as to receive payment. Companies also usually do not provide any credit terms and settlement is conducted on a month to month time frame.

I realise there are lots of scenarios and fringe cases which may justify a service provider or creditor opting to start using either EFT or EDO debit orders and will explore these scenarios in greater detail in my subsequent post.



Before you choose the <a href="http://www.debitorder.com">debit order collection</a> most suited to your company, take some time to learn more about the <a href="http://www.debitorder.com/services/naedo/">naedo service</a> from a respected industry professional such as Tim.

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New Unique Article!

Title: Finding the right debit order solution for your organization
Author: Tim Smart
Email: jj.vanwyk@gmail.com
Keywords: billing,billing system,invoicing,finance,payment,collection,payments,direct debits,debit orders,debit
Word Count: 697
Category: Ecommerce
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