Collecting payments by Direct Debit: options for small firms

A small firm can collect payments by Direct Debit by applying to its bank to submit to Bacs, by going through a bank or Bacs bureau, or by signing up with a payment provider such as GoCardless or Stripe. Providers are the quickest route for most small businesses, with fees from 1% per payment and no bank application. Whichever route you take, the Direct Debit Guarantee protects your customers.

What is Direct Debit and why use it?

Direct Debit lets you pull payments from a customer’s bank account once they have authorised you, for fixed or varying amounts. Bacs, which runs the scheme, calls it “the preferred payment method of UK bill payers”.

For a small firm, the benefit is control. You decide when you collect, so payment does not depend on the customer remembering to pay. It suits retainers, subscriptions, monthly fees and instalments. It can cut the time you spend chasing unpaid invoices.

What are your options for collecting Direct Debits?

There are three routes, and the right one depends on how many payments you collect. Bacs’s getting started page describes the first two; payment providers offer the third.

Becoming a direct submitter

A direct submitter sends payment files to Bacs itself, using its own Service User Number (SUN) issued through its bank. Bacs says your bank will assess you against the scheme’s criteria for “integrity, financial standing and administrative capability”.

You will also need Bacs-approved software and the processes to handle mandates, advance notices and claims. Bacs says this route “may be faster and cheaper than using a bureau” for high volumes.

Using a bank or bureau

With indirect access, you submit payment data through your bank or a Bacs-approved bureau instead of directly. Bacs says this is “often the most suitable method” for smaller organisations or those with a limited number of payments.

You still start by contacting your bank. Bureau fees and contract terms vary, so ask each bureau for a written quote.

Using a payment provider

A payment provider lets you collect Direct Debits without your own SUN or bank application. You sign up online, send customers a link to set up a mandate, and the provider collects and pays out to your account. These are the published UK prices, checked on 6 November 2026, listed alphabetically.

GoCardless adds 0.3% on Direct Debits over £2,000 and charges £50 a month to show your name on customers’ bank statements. It says most users pay no set-up or monthly fee. Stripe’s pricing page does not list failure or dispute fees for Bacs Direct Debit, and GoCardless’s page does not list failure fees either; ask before you sign up.

On a £100 monthly fee, GoCardless Standard costs £1.20 plus VAT and Stripe £1. On a £500 invoice, both reach the £4 cap.

What rules must you follow?

You must follow the Direct Debit Guarantee, which every customer receives when they set up a mandate. The Guarantee says:

• you will notify the customer, normally 10 working days in advance, before debiting their account or changing the amount, date or frequency
• if a payment is taken in error, the customer is entitled to “a full and immediate refund” from their bank
• the customer can cancel at any time by contacting their bank

The customer’s bank can recover a refunded payment from you, so keep records of each mandate and advance notice.

How to start collecting by Direct Debit

1. Count your payments. Estimate how many Direct Debits you will collect each month and their average value.
2. Price the routes. Compare provider fees at your average value with bank or bureau quotes.
3. Check your software. See whether your accounting or invoicing tool connects to your chosen provider.
4. Update your terms. Add Direct Debit to your payment terms and engagement letters.
5. Set up mandates. Send customers the sign-up link or form, which includes the Direct Debit Guarantee.
6. Send advance notice. Tell each customer the amount and date before the first collection.
7. Reconcile payouts. Match each payout to invoices, net of fees, and add collection dates to your cash flow forecast.

Which applies to you?

• If you collect a limited number of payments, Bacs points smaller firms to a bank or bureau, and a payment provider avoids the bank application.
• If your typical payment is over £400, the per-payment caps at GoCardless and Stripe keep the fee at £4 to £5.60.
• If you collect over £2,000 per payment, factor in GoCardless’s 0.3% surcharge.
• If you collect very high volumes, ask your bank about becoming a direct submitter.
• If customers often pay late, read up on late payment interest as well.

Frequently asked questions

Can a small business collect payments by Direct Debit?

Yes. Small businesses can collect through their bank, a Bacs-approved bureau, or a payment provider such as GoCardless or Stripe, which needs no bank application.

How much does it cost to collect by Direct Debit?

GoCardless’s Standard plan charges 1% + 20p per UK payment, capped at £4, plus VAT. Stripe charges 1% with a 20p minimum and a £4 cap, both checked on 6 November 2026.

Do I need a Service User Number?

Only if you submit to Bacs yourself. Payment providers collect under their own arrangements, so you do not need your own SUN.

How much notice must I give before taking a Direct Debit?

The Direct Debit Guarantee says customers are normally notified 10 working days in advance, unless you agree a different period.

Can customers get their money back?

Yes. If a payment is taken in error, the customer is entitled to a full and immediate refund from their bank, and the refund is reclaimed from you.

Can a customer cancel a Direct Debit?

Yes. Customers can cancel at any time by contacting their bank or building society.