Direct debit lets you collect money from your customer's bank account on a date you've told them about, under an instruction they sign once and can cancel at any time. You need either your own Service User Number from a sponsoring bank or a provider that collects for you, and every collection needs advance notice of the amount and date. In return you decide when you're paid, the amount can change from month to month, and the fee on a large invoice stays small.
In this article
The short version
- You need a signed mandate, advance notice of each amount and date, and either your own Service User Number or a provider that collects for you.
- Collections run through Bacs over three working days, and a provider's payout timing comes on top.
- Your customer can cancel at any time through their bank, and the Direct Debit Guarantee refunds any payment taken in error.
- The fee cap makes direct debit cheap on larger invoices: on Adfin, 1% + 20p with the 1% capped at £4.
- Direct debit suits recurring and contracted billing; pair it with a payment link for one-off invoices.
How direct debit works
Your customer signs a Direct Debit Instruction, usually called a mandate, which authorises you to collect from their account. From then on you decide the date and the amount, as long as you tell them both before each collection. The amount can vary, so a monthly fee that changes, a usage bill or an annual price rise all run under the same mandate without asking the customer to sign again.
That's the big difference from a standing order. A standing order is an instruction your customer gives their own bank to send a fixed sum on fixed dates, so they control it, and if your fees change you're relying on them to update it. It's also different from a card on file: cards expire and get replaced, and card fees aren't capped, so they cost more on larger invoices.
Collections run through Bacs on a three-day cycle. On day one the collection file is submitted, on day two the banks process it, and on day three your customer's account is debited and the collector's account credited at the same time. Weekends and bank holidays don't count, so a run over Easter or Christmas takes longer. If you collect through a provider, its own payout timing comes on top, so check how many working days it adds.
What you need before you can collect
There are two ways in. You can apply for your own Service User Number (SUN), the six-digit number that identifies an organisation collecting by direct debit. That means finding a bank to sponsor you, passing its checks on integrity, financial standing and administrative capability, and setting up Bacs software. Banks treat the facility much like lending, because they carry the refund risk if a collector can't pay back a claim, so a young or small business can be turned down however well it's run.
Or you can collect through a provider that already has the sponsorship and the scheme permissions, and sign up with them instead.
| Route | What it takes | Whose name your customer sees |
|---|---|---|
| Your own SUN | Bank sponsorship, credit checks, Bacs software, usually weeks of setup | Yours |
| Facilities management provider | Acts as the service user for you and signs the indemnity to the bank | Depends on the provider |
| Payment provider | The provider's own checks and onboarding, no bank application | The provider's by default, yours for a monthly fee |
Whichever route you take, the mandate has to be right. Bacs sets the wording and the order of information on every instruction, your sponsoring bank approves the design, and only you (or your provider) can lodge the instruction with your customer's bank. Online and phone sign-ups run through AUDDIS, the Bacs service that sends new instructions to banks electronically, which is why most small businesses use a provider's ready-made sign-up link.
Adfin is a payment provider of this kind, so you don't need your own SUN or a bank facility. It runs its own checks and usually a short onboarding call, and your customers see its name on their statements unless you choose at onboarding to show your own business name, for £36 a month.
The rules you follow on every collection
Your customer has to know the amount and the date before you collect, and again whenever either changes. The Bacs default is 10 working days unless a different period has been agreed with the payer, and providers agree shorter periods with your customers as part of their sign-up, often two or three working days. The notice can be the invoice itself, as long as it shows the amount and the collection date.
The Direct Debit Guarantee is the promise that makes customers comfortable signing. If an error is made in a payment, by you or by their bank, they're entitled to a full and immediate refund from their own bank. The bank refunds first and then recovers the money from you through an indemnity claim, so you'll usually hear about it after the money has gone. The Guarantee doesn't cancel the debt, though. If you collected an amount that was genuinely owed, the customer still owes it, and anyone who gets a refund they weren't entitled to has to pay it back when you ask.
Your customer can cancel a mandate at any time through their bank. You find out through ADDACS, the Bacs service that reports amended and cancelled mandates, and payments the bank couldn't take come back through ARUDD. Both carry a short reason code that tells you whether the account has closed, the customer has cancelled or the money simply wasn't there. Acting on those messages the week they arrive can save you a failed collection next month.
Mandates are open-ended, so if your agreement with the customer runs for a fixed term, put the term in the contract.
What it costs and what happens when a collection fails
On your own SUN you pay the bank's monthly and per-item fees. Through a provider you usually pay per collection. On Adfin's published pricing that's 1% + 20p per successful payment, with the 1% capped at £4 on direct debit and bank payments, so no direct debit costs more than £4.20, apart from an extra 0.3% on amounts above £2,000. There's no monthly fee or contract.
Because of the cap, a £1,500 invoice costs £4.20 by direct debit at those rates and £15.20 on a standard card, where the fee isn't capped.
Most failed collections are routine: the money wasn't in the account on the day, or the details have changed. The payer's bank returns the payment with a reason code and you try again or ask for another way to pay. It's worth asking any provider whether failed payments and retries cost you anything.
Direct debit suits anything recurring or contracted: retainers, subscriptions, service contracts, fees that change through the year. It's less suited to a one-off sale to a new customer, because the mandate and the notice period both take a few days. Most businesses end up using both, with direct debit for regular billing and a payment link for one-off invoices and anyone who hasn't signed yet. Adfin retries failed direct debits for free and charges nothing when a payment fails, and if the retries don't work the customer is asked to pay another way. Its AI Customer Agents can also chase unpaid invoices by email, SMS or WhatsApp, on a schedule and within rules you set.
Common questions
How does direct debit work for a UK business? Your customer signs a mandate once, you give advance notice of each amount and date, and the collection runs through Bacs over three working days. You need your own Service User Number or a provider that collects for you.
Do I need my own Service User Number to take direct debit? No. A payment provider or facilities management provider can collect for you, which spares you the bank application and credit checks.
How much notice do I have to give before a collection? The Bacs default is 10 working days unless a shorter period has been agreed with the payer. Providers agree shorter periods at sign-up, and Adfin notifies customers at least three working days before each collection.
Can the amount change from month to month? Yes. A mandate covers varying amounts, so you can collect different sums as long as you tell the customer the amount and date in advance.
Can a customer get a direct debit refunded? Yes, under the Direct Debit Guarantee their bank refunds any payment taken in error and then recovers it from you. A customer who receives a refund they weren't entitled to has to pay it back.
What does direct debit cost? Through Adfin, 1% + 20p per successful payment with the 1% capped at £4, plus 0.3% on amounts above £2,000. Failed payments and retries cost nothing.
Sources
- Bacs - Direct Debit: an introduction to the service (accurate as of October 2026) https://www.bacs.co.uk/media/pu4bmlzs/dd_introduction.pdf
- Bacs - Direct Debit Instruction templates and logo (accurate as of October 2026) https://www.bacs.co.uk/resources/direct-debit-instruction-templates-and-logo/
- Bacs - Glossary (accurate as of October 2026) https://www.bacs.co.uk/resources/glossary/
- Bacs - Direct Debit Facilities Management (accurate as of October 2026) https://www.bacs.co.uk/media/dg4pbsky/bacs-fm-direct-debit-v50.pdf
- Pay.UK (Direct Debit) - The Direct Debit Guarantee (accurate as of October 2026) https://www.directdebit.co.uk/direct-debit-explained/direct-debit-guarantee/
- Adfin - Pricing (accurate as of October 2026) https://www.adfin.com/pricing
