DD or SO

antix80

Hi folks
I work in a company that rebills invoices and charges. By that I mean, we receive a bill, pay it, and ask other (related) companies to reimburse us.

It might fall under interco, but there's no tax implications.

So, I'll give an example of how we work it.

We have shops. Each shop has a manager who costs 3k a month. We pay the manager a salary so it's pretty seemless for the manager. The shop has a standing order of 3k a month to reimburse us for payroll, taxes and pension.
Now, if the manager does paid overtime, or receives sick pay, or we pay a temp to cover for absence, we now need to bill the shop the difference.

I'm wondering if the standing order is completely inefficient. As we have the true figures on a timely basis, and the variance is never more than a few hundred euros (so little risk of insufficient funds) it seems to me a monthly DD is the way to go.

Can anyone give feedback please in terms of bank fees (setup costs, ongoing costs) vs standing orders, and any administrative overhead.. Anything else I may be missing?

antoinolachtnai

Direct debut would seem like the way although you have to gently ease your customers into it.

Off the top of my head the people to talk to about this are stripe, sentennial, nuapay and your own bank. There are a few different approaches to doing it.

The actual transactional costs are not that big in the context of a business like yours. If you can get it to work, the time saved and cash flow benefits will almost certainly outweigh the costs.

There is a bit of a learning curve with this. You need to understand the rules about it and you need to think about how you manage the customers.

antix80

Own bank seems to be the way. The fewer people to deal with, the better.

The customers are internal. Many will see it as one less admin burden, though some can be more awkward (especially the ones who don't have an SO set up)

The main burden of this whole process would be having the DD file ready every month.. But a few hrs a month vs a week of reconciling and true ups, credit control and writeoffs, I think DD will be doing it right instead of fixing things up later.

antoinolachtnai

antix80 wrote: »

Own bank seems to be the way. The fewer people to deal with, the better.

The customers are internal. Many will see it as one less admin burden, though some can be more awkward (especially the ones who don't have an SO set up)

The main burden of this whole process would be having the DD file ready every month.. But a few hrs a month vs a week of reconciling and true ups, credit control and writeoffs, I think DD will be doing it right instead of fixing things up later.

All seems like good thoughts.

But:

The reason people use those parties is because it makes the process easier.

I am sure your company has a model and a dynamic all its own but this may not be a great way to manage cash and admin in this enterprise at the high level. You are using the banking system to account for things they could just as well be accounted for in the company’s own accounting system. You could operate with a smaller number of bank accounts, less admin and more centralized control of payments.

Not that you can solve this problem, but you should be aware that change may be coming down the track. I would run your plans by whomever runs finance overall in the company before you actually implement.

daheff

why are you doing this monthly?

Why not invoice monthly and make 1 payment every quarter/half year/year?


costs would really depend on our bank and the companies agreement with the bank. these are always individual. In general a monthly DD vs SO would be cheaper in cost, but maybe not so in processing times (ie you have to pay people to create the files, upload to your bank and then charge the customer).

not a route i would suggest if i'm honest with you.

antoinolachtnai

daheff wrote: »

why are you doing this monthly?

Why not invoice monthly and make 1 payment every quarter/half year/year?


costs would really depend on our bank and the companies agreement with the bank. these are always individual. In general a monthly DD vs SO would be cheaper in cost, but maybe not so in processing times (ie you have to pay people to create the files, upload to your bank and then charge the customer).

not a route i would suggest if i'm honest with you.

I imagine they are trying to balance cash between accounts. The OP needs some sort of gadget to export invoices into the file format certainly and this is why he might be better off working with a partner of some sort.

Maybe there is some reason for it but it doesn’t sound like a great operating model for a group. If it is really planned to do it this way for the long term (if the group is being split up say) then the DD might be a good idea or at least an improvement on standing orders all over the place.

daheff

antoinolachtnai wrote: »

The OP needs some sort of gadget to export invoices into the file format certainly and this is why he might be better off working with a partner of some sort.

fees for the companies mentioned above are not great...unless you are DD in bulk its not worth while.


OP maybe where there are changes to the SO amount the local shops could wire the difference over? Or does your ERP have the functionality to output XML file for upload to your bank?


Hard to give much better advise without knowing your ERP/Bank/number of DDs/currencies etc.