Bacs Direct Debits (DD) and Direct Credits (DC) have undoubtedly become a cornerstone of the UK's payment processes over the past decade, with almost six billion payments processed each year. However, with the latest research published in The Telegraph on 12th June revealing that SMEs are losing £22bn a year to various types of fraudulent activity - something needs to be done to ensure small organisations are doing all they can to reduce manual intervention, improve controls and protect themselves against unnecessary bank account errors before payments are processed.
Independent market research commissioned by Bottomline Technologies in 2013 found that bank account and/or sort code errors account for 71% of failed DD/DC transactions. Furthermore, Bacs estimates that every payment or collection failure costs up to £50 to investigate and repair; but this doesn't take into account the loss of the failed transaction value. In fact, 60% of businesses state that every failed DD actually costs them £50 or more.
What can be done?
The key is not only to check that a bank account and sort code are valid - that a specific bank account number fits the rules that associate it with a specific sort code - but also to verify bank account ownership. Opting to verify and validate at point of entry significantly reduces the margin for error.
By flagging issues with account number or sort code in real time, the details provided by customers, employees or suppliers can be checked on the fly - avoiding both natural mistakes and fraudulent intent. According to our research, this approach reduces the cost of managing customer queries (51%); delivers better cash management visibility (42%) and provides a better acquisition and sign up process (40%).
It is only by imposing real time control that organisations can spot fraudulent activity, flag and address innocent mistakes up front to reduce DD and DC failure and truly realise the benefits of more predictable cash flow.
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