Managing direct debiting in Accounts Receivable

You can 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

Before you start, you must meet these prerequisites:

You must have well-defined routines for managing direct debiting and be fully aware of the costs and savings involved.
A text to be printed on the invoices, stating that the payment is made through direct debiting, must be created in 'Payment Instruction. Open' (CRS285) and connected to each customer in 'Customer. Open' (CRS610/K).
See the corresponding subordinate process document or instruction for further starting conditions.

Follow these steps

Managing direct debiting agreements.
The basis for direct debiting is the agreement you specify 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, you can use direct debiting without registered agreements. In that case, a special payment method allowing for this must be used when creating invoices.
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.
Remitting invoices to bank.
You can create a bank remittance statement with the invoices you have selected in 'Bank Remittance. Open' (ARS300) or 'Remit Direct Debit and Factoring. Open' (ARS410) and send it to the bank. For payment documents with no electronic confirmation, the invoices are closed automatically. For electronic confirmation, the invoices remain open until payment has been verified in 'Bank Statement. Open' (ABS100).

See Electronic confirmation in Create payment type.
Reconciling payments.
When you received the confirmation from the bank, report the invoices as paid or unpaid in 'Bank Remittance. Reconcile Payment' (ARS350) or 'Remit Direct Debit and Factoring. Open' (ARS410). If the bank confirmation is received in a batch file, you can do this in 'Bank Statement. Open' (ABS100).