Companies are not aware of the many advantages of making use of a debit order service to collect funds from their consumers, not to mention which debit order technique would be the best for their needs.
Having dealt with many organisations payment collection methods I will try and explain why you need to be using debit order as best payment collection method for your online business along with which debit order strategy would be most appropriate for your marketplace and type of client base.
Lets start with what a debit order is:
A debit order is an instruction which a bank or credit card account holder gives a business to recover funds straight from their banking account. They manner in which a client presents this instruction is simply by performing a written or spoken (commonly telephonic) debit order mandate.
A debit order, as we refer to it in South Africa, may be known as the direct debit in many areas of the planet. For additional info on direct debits please see the appropriate Wikipedia webpage.
In South Africa there are actually commonly 2 types of debit order. Electronic Funds Transfer (EFT) and Early Debit Order (EDO) which may 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 via the standard financial debit order runs. Both AEDO and NAEDO debit orders run in a randomised manner before EFT debit orders and enable creditors an identical capability to collect funds from their consumers.
NAEDO debit orders were launched in 2008 due to a National Credit Act initiative and allow creditors to recover up to R5,000.00 in the most fair manner possible. You should note that regular EFT debit orders make provision for collecting anywhere up to R500,000.00 per debit instruction.
EFTs are usually more cost effective than AEDOs and NAEDOs but don't include the option to track a client account/credit card for up to 32 days. If monies were to arrive in the account while in the tracking period, these monies could be restricted for collection by the party initiating the debit.
Some simple examples to clarify how EFT and NAEDO debit order collections can be used:
1. An investment organization wishing to collect an additional payment from one of their investors would most definitely make use of an EFT debit order on the grounds that the possibility of the client having money handy for collection is very high. The total to be collected would also many times go over the R5,000.00 NAEDO limit and cost of the collection could be a factor.
2. Insurance brokers acquiring a monthly payment from one of their customers for funeral cover might be best off making use of a NAEDO debit order run. The likelihood of this customer having available funds is reasonably low and tracking is going to be helpful to monitor the clientele account for when funds do turn up (ordinarily their regular monthly salary).
Almost any micro lender would be best off making use of NAEDO as they deal with customers who tend not to have funds available within their accounts especially over the typical debit collection periods. This is quite obvious since these individuals would have a record of applying for credit and would possibly have several debit orders to several creditors going off on the same day. It is because of this that the randomisation of NAEDO orders may become a major benefit to ensure each creditor has got an equal possibility of being paid back.
In contrast any service agency will likely choose EFT for their desired debit order procedure since they maintain some type of control over their customer by means of ending/suspending service as a way to obtain payment. Service providers also normally do not offer any credit terms and payment is completed on a month-to-month basis.
I realise there are many circumstances and border cases which might warrant a service provider or creditor opting to make use of either EFT or EDO debit orders and definately will look into these situations in depth in my next article.
Having dealt with many organisations payment collection methods I will try and explain why you need to be using debit order as best payment collection method for your online business along with which debit order strategy would be most appropriate for your marketplace and type of client base.
Lets start with what a debit order is:
A debit order is an instruction which a bank or credit card account holder gives a business to recover funds straight from their banking account. They manner in which a client presents this instruction is simply by performing a written or spoken (commonly telephonic) debit order mandate.
A debit order, as we refer to it in South Africa, may be known as the direct debit in many areas of the planet. For additional info on direct debits please see the appropriate Wikipedia webpage.
In South Africa there are actually commonly 2 types of debit order. Electronic Funds Transfer (EFT) and Early Debit Order (EDO) which may 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 via the standard financial debit order runs. Both AEDO and NAEDO debit orders run in a randomised manner before EFT debit orders and enable creditors an identical capability to collect funds from their consumers.
NAEDO debit orders were launched in 2008 due to a National Credit Act initiative and allow creditors to recover up to R5,000.00 in the most fair manner possible. You should note that regular EFT debit orders make provision for collecting anywhere up to R500,000.00 per debit instruction.
EFTs are usually more cost effective than AEDOs and NAEDOs but don't include the option to track a client account/credit card for up to 32 days. If monies were to arrive in the account while in the tracking period, these monies could be restricted for collection by the party initiating the debit.
Some simple examples to clarify how EFT and NAEDO debit order collections can be used:
1. An investment organization wishing to collect an additional payment from one of their investors would most definitely make use of an EFT debit order on the grounds that the possibility of the client having money handy for collection is very high. The total to be collected would also many times go over the R5,000.00 NAEDO limit and cost of the collection could be a factor.
2. Insurance brokers acquiring a monthly payment from one of their customers for funeral cover might be best off making use of a NAEDO debit order run. The likelihood of this customer having available funds is reasonably low and tracking is going to be helpful to monitor the clientele account for when funds do turn up (ordinarily their regular monthly salary).
Almost any micro lender would be best off making use of NAEDO as they deal with customers who tend not to have funds available within their accounts especially over the typical debit collection periods. This is quite obvious since these individuals would have a record of applying for credit and would possibly have several debit orders to several creditors going off on the same day. It is because of this that the randomisation of NAEDO orders may become a major benefit to ensure each creditor has got an equal possibility of being paid back.
In contrast any service agency will likely choose EFT for their desired debit order procedure since they maintain some type of control over their customer by means of ending/suspending service as a way to obtain payment. Service providers also normally do not offer any credit terms and payment is completed on a month-to-month basis.
I realise there are many circumstances and border cases which might warrant a service provider or creditor opting to make use of either EFT or EDO debit orders and definately will look into these situations in depth in my next article.
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Before selecting debit order collection, be sure to check Deb Odres excellent resources on the best naedo facility available for your business.
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