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Finding the right debit order solution

by Tim Smart

Many businesses are not aware of the many advantages of making use of a debit order service to recover monies from their customers, let alone which debit order technique would be the suitable for their needs.

Having sorted out many businesses payment collection methods I will try to explain why you need to be using debit order as favourite payment collection solution to your business and also which debit order strategy will be most suitable for your market and kind of clientele.

We begin looking into what a debit order is:

A debit order is an instruction that a bank or credit card account owner gives a organization to recover monies directly from their banking account. They method by which a person presents this instruction is simply by performing a written or verbal (normally telephonic) debit order mandate.

A debit order, as we make reference to it in South Africa, may be known as a direct debit in many parts of the globe. To learn more about direct debits please visit the relevant Wikipedia article.

In South Africa there are actually typically two kinds of debit order. Electronic Funds Transfer (EFT) and Early Debit Order (EDO) that may further be broken into Authenticated Early Debit Order (AEDO) and Non-authenticated Early Debit Order (NAEDO). EFT debit orders follow EDO debit orders when processed via the standard bank debit order runs. Both AEDO and NAEDO debit orders run in a randomised manner before EFT debit orders and enable collectors an identical opportunity to collect monies from the debtors.

NAEDO debit orders were announced in 2008 as a result of National Credit Act initiative and permit lenders to acquire as much as R5,000.00 in the most fair manner possible. 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 usually less expensive than AEDOs and NAEDOs but do not include the capability to track a persons account/credit card for up to 32 days. If funds would arrive in the account while in the tracking period, these funds could be restricted for collection by the party triggering the debit.

Some simple examples to explain how EFT and NAEDO debit order collections could possibly be used:

1. An investment business wishing to collect an additional payment from one of their clients would almost certainly use an EFT debit order as the probability of the customer having available funds for collection is incredibly high. The total amount to get collected would also many times go beyond the R5,000.00 NAEDO limit and cost of the collection will be a consideration.

2. Insurance brokers recovering a monthly premium from one of their consumers for funeral cover might be best off utilizing a NAEDO debit order run. The probability of this client having available funds is fairly low and tracking is going to be useful to keep tabs on the customers account for when monies do arrive (usually their regular monthly paycheck).

Almost any small lender would be better off employing NAEDO because they deal with clients who normally do not have funds available inside their accounts especially on the normal debit collection days. This is certainly quite obvious as these individuals probably have a history of obtaining credit and would possibly have many debit orders to several creditors going off on the same day. It is because of this that the randomisation of NAEDO transactions could become a major benefit to ensure each creditor has an identical chance of being paid.

Conversely any service agency will in all probability select EFT for their favored debit order method because they maintain a certain amount of influence over their consumer by means of ending/suspending service as a way to obtain payment. Service providers also tend not to offer any credit conditions and payment is made on a month to month basis.

I realize there are plenty of occasions and edge cases that might warrant a service provider or creditor opting to make use of either EFT or EDO debit orders and will investigate these situations in depth throughout my subsequent post.



Before choosing your <a href="http://www.debitorder.com">debit order collections</a>, be sure to check Tim Smarts excellent resources on the best <a href="http://www.debitorder.com/services/naedo/">naedo facility</a> available for your business.

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New Unique Article!

Title: Finding the right debit order solution
Author: Tim Smart
Email: jj.vanwyk@gmail.com
Keywords: billing,billing system,invoicing,finance,payment collection,payments,direct,debits,debit orders,debit
Word Count: 682
Category: Ecommerce
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