Using a standing order
A standing order is an automated method of making payments, where a person or business instructs their bank to pay another person or business a fixed amount of money at regular (fixed) intervals, according to gocardless.com.
The payer controls the standing order; they set it up themselves, and choose the amount and frequency. Standing orders are created to cover a set period of time (e.g. every month for a year), or until they are cancelled.
Any person or company with a current account can set up a standing order, either online, over the phone or at in person at a branch of their bank.
A standing order is different to a direct debit payment. A standing order is essentially an instruction from the payer to their bank, telling their bank to ‘push’ funds to another person or organisation.
In contrast, when you set up a direct debit, the person or organisation receiving payment asks permission from the payer to ‘pull’ funds from their account on a recurring basis.
Some small businesses collect regular payments from customers by standing order. Receiving payment by standing order generally costs nothing, and, once the order is up and running, the business can rest assured that payments will be collecting automatically and on time.
However there are drawbacks: a customer can change or cancel the payment without notifying you, so you will have to rely on them to get this part right.
How does a standing order work?
The first step in setting up a standing order requires the payer to contact their bank to request it. With some banks, standing orders can be set up online or over the phone. The payer then completes a standing order form (paper or online) and gives it to their bank. This will include details of the account number and sort code of the person or organisation being paid.
Banks don’t usually charge anything to the payer or payee for setting up or using standing orders. It is important to keep in mind that customers can cancel a standing order at any time, or change the amount or payment date.