Standing Order Advantages and Disadvantages
There are plenty of bills and expenses that businesses incur over their lifetime. Some of them require one-off payments, while others are ongoing expenses that need regular payments. When regular payments or instalment payments are needed, standing orders may be beneficial. Learn all about standing orders, their advantages, and their disadvantages here!
Here’s What We’ll Cover:
What Are Standing Orders?
When it comes to paying bills, there are several payment methods available. One of them is standing orders. Standing orders are an automated method of payment that a person or a business can set up with their bank. When instructed to, the bank will send payments to the other entity. The payment amount is set up ahead of time, and only the authorized amount can be sent. The person paying the money controls the entire process, and will choose the amount and the frequency.
Standing orders can be set up by any person with a basic bank account or a business bank account. Most online banking applications will allow users to set up standing orders. If this isn’t an option, calling or visiting a bank branch can help you accomplish this.
Is a Standing Order the Same as a Direct Debit Payment?
Standing orders and direct debit payments aren’t the same. Standing orders are an instruction from a customer to their bank. It tells their bank to push funds to another person or organization. A direct debit payment is the opposite. The person who is receiving the payment asks permission to pull funds from a bank account.
How Are Standing Orders Set Up?
Standing orders are easy to set up. The person sending the payment has to contact their bank to request the standing payment. The customer setting up the standing order will have to provide some details to the bank in question:
- Bank details for the recipient
- The recipient’s account number
- The name of the account holder (person or organization)
- The amount to be sent
- The frequency of the payment
It’s as simple as that! The payments can be cancelled as easily as they are set up, as well.
Advantages of Standing Orders
Standing orders are a payment method that come with a number of advantages. As such, there are scenarios where using them would be better for both the payer and the payee.
Free of Charge
Most of the time, standing orders are free of charge for both parties. Other payment methods, like credit cards or electronic funds transfers, may charge a fee to one or both parties. No fees mean no extra money leaving your bank account.
Easy to Set Up
Standing orders are easy to set up through most banks. In most cases, they can even be set up through online banking applications. This makes them more advantageous than other payment methods.
Useful for Recurring Payments
The biggest advantage of standing orders is their application in recurring payments. Many services and goods need to be paid for on a monthly basis. This helps customers prevent late payments. It also means that business can go on without interruption. These are the best options for individuals or companies that need payment organization.
Disadvantages of Standing Orders
Standing orders do have their faults, however. All of them are listed below.
There Aren’t Notifications
Standing orders don’t come with notifications. Bank notifications are not enabled for these payments. As such, if a payment fails then the customer may not know about it for weeks. For individuals who aren’t on top of their payments, this can create a problem.
They Aren’t Flexible
If any details need to change regarding the standing order, it has to be cancelled and set up again. This can be frustrating if arrangements change regarding the payment agreement.
Because standing orders don’t come with notifications, they can be high maintenance for the payee. They won’t be notified when the payment has cleared. As such, business owners may have to constantly check their bank accounts to make sure that they’ve been paid. If they haven’t received payment, it can take longer to receive the money they need to continue providing services.
If you’re looking for the best way to set up recurring payments, then you may be interested in using standing orders. They’re fee-free, and are very easy to set up. Standing orders are one of the best ways to make sure all of your payments are on time. You just need to verify that they make it to their destination. There are more articles just like this one on our resource hub. Be sure to check them out!