Standing order – What is a standing order?
A standing order is an automated payment method set up by a customer through their bank.
Standing orders automatically send a fixed amount of money on a regular basis, and they can be used to send money to other people, organisations, or another bank account.
When to use standing orders
Some of the most common reasons for setting up a standing order include:
Paying rent
Paying utility bills
Putting money into a savings account or ISA.
As a freelancer or small business owner, you might use standing orders to pay bills or make payments to regular suppliers, but you might also want to use standing orders as a way of accepting payments from customers.
It only makes sense to use standing orders for regular, repeat sales. For example, if you run a subscription service or use recurring invoicing, standing orders might be a suitable way of accepting payment, as you can predict how much the customer will need to send and how often they’ll need to do this.
How to set up a standing order
Standing orders are set up by the customer through their bank. This means that the only person who can set up or control a standing order is the person who sends the money. The person or organisation that receives the money cannot set up or manage a standing order in any way.
Traditionally, standing orders needed to be set up in a branch, but since the introduction of online and mobile banking, it’s now common to set up a standing order through a banking website or banking app.
When you set up a standing order, you’ll need to provide:
The amount of money you want to transfer
The frequency of the standing order – e.g. weekly, monthly, quarterly, or yearly
The recipient's bank details
You might also be able to enter a personal reference (which appears in your bank account), a reference for the person you’re sending the money to, and an end date (after which the standing order will stop).
As a business owner or freelancer who accepts payment via standing order, you’ll need to provide your customers with your bank details, the amount of money to send, and the payment dates/intervals. Your customers will then use this information to manage the actual set-up of their standing orders.
What happens if a standing order isn’t paid?
There are two main reasons why a standing order might not get paid. Firstly, if you don’t have enough money in your account, your bank won’t be able to transfer the money. Secondly, if the standing order has expired, your bank won’t know that the money should be transferred.
The consequences of missing a standing order vary from case to case. They also depend on whether you’re the person sending the money or the person receiving the money.
If you’re a customer who doesn’t pay a standing order, you might face late fees or penalties from the business that’s expecting payment. Missing payments could also affect your credit rating and damage relationships with suppliers.
If you’re a freelancer or business owner who doesn’t receive an expected standing order, your finances might be affected in a number of different ways. An unpaid standing order could limit your cash flow, but it might also mean that your invoice is never paid, in which case you would need to write off the unpaid amount as a loss.
Cancelling a standing order
There are several reasons for cancelling a standing order. For example, you might use a standing order to pay for a subscription to an online streaming service. When your subscription is due to expire, you would need to cancel the standing order to ensure that you don’t keep paying for a service you’ll no longer receive. Alternatively, you might want to continue using the online service but would prefer to pay with a different payment method.
Unless you specify an end date, a standing order will remain active until you manually cancel it, and standing orders can usually be cancelled at any time.
However, you should bear in mind that there are several consequences for missing payments, so if someone is expecting to receive money from you, you’ll need to think about alternative ways of paying.
How to cancel a standing order
As with the set-up of a standing order, the only person who can cancel a standing order is the person making the payment. Again, this needs to be done through your bank – in a branch, online or using a mobile banking app.
What’s the difference between a standing order and a direct debit?
As they’re both automated methods of payment, standing orders might seem very similar to direct debit. However, there is one key distinction: standing orders are controlled by the payer, direct debits are controlled by the payee.
This means that standing orders need to be set up by the person sending the money, whereas direct debits are set up by the person receiving the money. Similarly, standing orders can only be cancelled or amended by the payer, while direct debits can only be cancelled or amended by the payee.
Although you need to authorise both standing orders and direct debits through your bank, the specific action differs. When you authorise a standing order, you instruct your bank to send money to another person, organisation, or bank account. When you authorise a direct debit, you instruct your bank to allow another person or organisation to take money from your account.
Standing orders and SumUp Invoices
SumUp Invoices offers freelancers and small business owners a number of different ways to accept payments from customers.
Because standing orders are set up by the payee, it’s important that you give your customers enough information to set up a standing order if this is how you would like them to pay.
You should give them your bank details and should state in the payment terms that this is your preferred method of payment. You should also specify how often the standing order should occur.
With SumUp Invoices, you can enter your bank details on your invoices to accept bank transfers and standing orders. We also offer a variety of other payment methods such as online payment links, card readers, and QR codes.