How Do I Deal With Direct Debits And Standing Orders?

Direct debits and standing orders are used increasingly by individuals, households and businesses as a simple and effective way to manage and pay bills or make regular or occasional payments.

Direct Debits are facilities set up to allow individuals or businesses to withdraw money directly from your bank account. The facility must be authorised by you and there are rules about the amounts that can be withdrawn. You have the protection of the direct debit guarantee which covers you if something goes wrong – for example, if you want your money returned. You can cancel a direct debit facility at any time by contacting your bank. Understand more about direct debits by reading the web link below.

Standing Orders (or banker’s orders) are instructions that you give to your bank to pay a fixed amount of money at regular intervals (say on the 1st of the month) to another designated bank account either for a specific period or a number of payments or until cancelled.
You initiate the instruction and can cancel a standing order at any time by contacting your bank.

What’s the difference? There are two main differences:
A standing order is when you send money to another bank account whereas a direct debit is when another bank account claims money from your bank account.
After a standing order payment is sent, there is no way of claiming it back without contacting the recipient bank account holder and asking them to repay whereas you can instruct your bank to reclaim a direct debit withdrawal if you disagree with the amount withdrawn. So, in fact, you are more protected with a direct debit facility than you are with a standing order instruction.
You might like to read what the financial ombudsman has to say about these –

http://www.thesmartwaytopay.co.uk/

Having understood this, there is no difference between processing direct debits or standing orders and processing other supplier or expenses payments.
See Record a Supplier Invoice Payment if your DD/SO is a payment against a supplier invoice.
See Record a Bank Transfer if your DD/SO is, for example, to pay a credit card statement.

If your direct debit or standing order is for a regular amount and paid at regular intervals, you may wish to record this as an automatic journal, which will then be processed automatically to your pre-defined analysis and frequency. e.g. for a purchase ledger account debit the account in the purchase ledger and credit the bank account – See Post Journal Entries Automatically.