What is a Standing Order?

There are multiple situations in which we need to transfer money on a regular basis. Rent and utility bills may be the most common ones, but recurring payments are also equally popular to pay contractors, freelancers or suppliers. In this article, we discuss what is a standing order, how it works and what it can be used for.

Meaning of standing order

A standing order is a automated method of making payments on a recurring, fixed basis. When you set up a standing order, the payments are automatically taken from your account on the agreed day and at the agreed frequency. The payer has full control over the standing order, so payers are the only ones that can cancel or amend it. For instance, if you have to pay a supplier for their services on a monthly basis, and the rates and hours of work are the same every month, you could set up a standing order to avoid missed or delayed payments. Standing orders can have a fixed duration, but they can also be permanent. Payers are able to cancel them at any time.

What are standing orders used for?

Standing orders are recurring payments, therefore used for repeated sales rather than one-off purchases. This could be rent, utility bills, subscriptions, regular charity donations, freelancers or contractors’ salaries or even adding money to your savings account. The examples are various, but they all have one thing in common: these are payments that payers make on a recurring basis.

Freelancers may use standing orders to get paid from their various clients, as they provide services on an ongoing basis. If they have a fixed rate and fixed work schedule, they are able to determine how much they need to get paid and the frequency of the payment. Standing orders are quick to set up, and a great way to avoid missing payments, especially when there’s a specific due date for them.

How to set up a standing order

Standing orders can only be set up by the customer and owner of the bank account. Companies can’t set up standing orders themselves – the customers must do this directly with their bank, either at a branch or online via their banking app. Equally, customers are the only ones who have the power to manage how much money they send and to whom.

When setting up a standing order, they will be requested to provide information regarding the amount of money they would like to send, the payee’s bank details and the frequency of the standing order (weekly, monthly, quarterly, etc). Customers may also be able to provide a payment reference and an end date for the standing order. When this information is provided, the recurring payments will cease on this date.

What’s the difference between a standing order and a direct debit?

Both a standing order and direct debit work on a recurring basis. This means that the contract is ongoing and automated, so the amounts of money are taken directly from the accounts on the dates that were initially set.

However, as opposed to standing orders, direct debits are set up by the payee. Companies will set up the payees’ bank details, amounts to be paid, as well as frequency of the payment. Payees have to agree to this direct debit contract beforehand. Though payees are able to request cancellation of this contract whenever they wish, only the payer can directly cancel or amend it.   Standing orders, on the other hand, are set up and fully controlled by the payer. The payer is the only person that can amend or cancel them.

In short, the payer needs to authorise both standing orders and direct debits. However, with standing orders, the payer is requesting their bank to make payments to other person or organisation on a recurring basis and a set frequency. With direct debits, the payer is requesting their bank to allow a company to take money from their account.

How to cancel a standing order

If you don’t specify an end date for the standing order, the payments will be ongoing until you manually cancel it. Payers can do this easily either by visiting a branch, through the bank’s website or through their mobile banking app. Standing orders can be cancelled at any time. However, if a payment is due on the date you wish to cancel the standing order, you may still have to make this payment. It is important to notify the payee that the standing order will be cancelled, or else they will be expecting the payment still and you may have to find other ways to pay.

How Imburse can help

Imburse is a cloud-based middleware connecting large enterprises to the payments ecosystem, regardless of their existing IT infrastructure. Through a single connection to Imburse, enterprises can collect or pay out using a variety of payment technologies and providers around the globe.

In a world where consumers payment preferences and technologies are ever-evolving, Imburse works with insurers to future-proof their payment requirements. Regardless of the business area, market, or requirements, Imburse will connect you to your choice of technology and provider.

Reach out to our team below should you want to discuss how Imburse can help you. Our team is happy to show you what our platform can do for your business and offer you a free demo.