Understanding Direct Debit Processing

Direct debits are a contractual method for collecting payment and receipts. The supplier and customer set up a contract that enables the supplier to collect an amount due for specific goods or services directly from the customer's bank through electronic funds transfer (EFT). Some banks require a cover letter for the EFT files they receive.

You can set up the direct debit data to require the creation, transmission, and confirmation of a direct debit prenote, which is a zero dollar electronic payment that is sent to the customer's bank to confirm the accuracy of customer's bank information. Prenotes help to eliminate additional processing or handling fees due to the transmission of incorrect customer account information to the customer's bank, and reduce any delays in receivable collections based on direct debit transactions. The Create Direct Debit process (AR_DIRDEBIT) must process and confirm the prenote before it can process any associated direct debit transactions.

This topic discusses the following:

• Remittance methods.

• Direct debit process flow.