Managing Direct Debiting in Accounts Receivable

This document contains an outline of how you use direct debiting to automate the process of invoicing customers and recording payments.

The purpose of direct debiting is to automatically transfer specific amounts from the customer's bank account to the company bank account at certain intervals. Direct debiting is primarily used when selling the same services or products on a regular basis to a customer.

For a description of an alternative workflow for direct debiting, see Managing Direct Debiting according to the Danish Model.

Outcome

Customer debts are collected automatically. For detailed information, see the corresponding instruction.

The payments processed affect your customer credit and risk management as well as your cash flow management.

Accounts receivable and the general ledger are updated. For information on account entries created, see the corresponding instruction.

Before you start

Electronic Direct Debiting in Germany

When remitting direct debiting payment orders electronically in Germany in a so-called DTAUS payment file (in non-EDIFACT format), a separate bank report ("Datenträgerbegleitzättel") with file information is required. If the number of invoices to be paid for a customer in the remittance is greater than the number specified for the company bank account used, a separate payment specification ("Avis") is printed and sent to the payer. The starting conditions for this are:

Follow These Steps

  1. Managing Direct Debiting Agreements

    The basis for direct debiting is the agreement you enter into with the customer. You register the agreement and its controlling values in 'Direct Debiting Agreement. Open' (ARS450) and then send it to the bank.

    However, it is possible to use direct debiting without registered agreements. In that case, a special payment method allowing for this must be used when creating invoices.

  2. Send Invoice to Customer for Information Purposes

    When a new customer invoice is created, an order with the unique direct debiting agreement number is created automatically as well. A message that this invoice is for information purposes only and should not be used for payment is included in the invoice. Depending on your company routines or the type of agreement, send the invoice to the customer.

  3. Remitting Invoices to Bank

    You create a bank remittance statement with the invoices you have selected in 'Bank Remittance. Open' (ARS300) and send it to the bank. The invoices are closed automatically.

  4. Reconciling Payments

    When you have received the confirmation from the bank, report the invoices as paid or unpaid in 'Bank Remittance. Reconcile Payment' (ARS350) or 'Draft/Check. Open Unpaid or Rejected' (ARS340) respectively. If the bank confirmation is received in a batch file, you do this in 'Batch Payment. Update' (ARS040).

Related topics