Adopting Automation in Receivables Management - Key Strategies

By
Rohith Reji
5 Jun
5 Mins

Staying competitive and creating growth in today's fast-paced corporate market requires efficiency. The area where efficiency can be significantly improved is the account receivables management. Automating accounts receivable processes can make it easier to monitor payments and invoices while reducing the possibility of human mistakes. Automation solutions allow firms to streamline AR operations, improve accuracy, and boost performance. In this blog, we'll discuss how automation affects AR management and how to use it to reduce risks.

Challenges Associated With Accounts Receivable

The challenges with accounts receivable consist of staff training requirements, resistance to change, and integration complexities. Organizations frequently encounter disruptions that demand time and resources throughout the learning trajectory. Technical expertise, customization, and efficient navigation from third-party partners can alleviate these issues.

Importance of Accounts Receivable Management

What is Receivables Management? Customer payments are tracked and collected by accounts receivable management. This is crucial as it enables the organization to monitor and regulate cash flow, ensures prompt customer payment, and aids in cash flow management.

  • If you keep a close eye on payments and invoices, your business can ensure it gets the total amount due on time, which is suitable for your credit.
  • Using a paperless invoicing system, one can conveniently monitor invoices and payments, promptly identifying consumers with outstanding balances. This lets you easily collect unpaid amounts.
  • Managing accounts receivable (AR) can also help reduce bad debt costs (accounts that aren't paid) and boost profits.
  • Management of receivables enhances customer service by facilitating payment plans or automatic payments.
  • Tracking customer payments helps identify late payers and improve payment practices.

Automation of AR Management

At first, companies had to deal with accounts receivable process steps that were done by hand, took a lot of time, were prone to mistakes, and were time-consuming. Sophisticated automated techniques, made possible by the evolution of modern technologies, revolutionized AR management with improved speed and accuracy by facilitating smooth invoice preparation, payment reminders, and reconciliation.

After some initial implementation issues, businesses began using automated AR systems, increasing productivity and accuracy. Organizations will use enhanced AI-driven automation to integrate with existing systems, minimize human intervention, and optimize AR operations for maximum efficiency.

The change will revolutionize receivables automation. Businesses will benefit from automated processes, faster cash flows, and lower operating expenses, solidifying automation as the core of modern AR practices.

However, accounts receivable management requires monitoring and controlling an organization's balances. It includes billing, managing credit, and applying cash, all of which are meant to ensure customers pay on time.

Effective Accounts Receivable Strategies

Businesses may automate and improve AR management using these strategies:

  • Advanced Automation: Implement AI-driven automation technologies to speed up typical AR activities, eliminating manual labor and processing errors.
  • Automated Reminders: Implementing automated reminders for past-due payments to improve communication and increase on-time payments.
  • Efficient Credit Rating System: To make better decisions and reduce risk, integrate computerized credit scoring systems to evaluate customers' creditworthiness in real time.
  • Auto-reconciliation: Automated reconciliation methods ensure accuracy and reduce the likelihood of errors in AR records by matching payments with invoices.
  • AI-powered collections: Optimize debt recovery using AI algorithms to assess client behavior and modify collection techniques.
  • Automating Workflows: Workflow automation can improve department communication, speed up AR approvals, and reduce delays.

The Best Ways To Automate Accounts Receivable (AR)

1. Begin with data free of errors and a billing blueprint.

Before applying the software, you need clean, precise data to feed your automation tool. Create an invoice template to avoid errors. This also reduces balance sheet errors.

When considering getting accounts receivable software, ensure it works well with your current tech system so you don't have to deal with problems or extra costs. For this, it's necessary to check the compatibility of prospective AR automation solutions with existing systems.

Check your accounts receivable data to ensure it's ready for AR automation software.

This action minimizes errors, and data precision remains intact when using accounts receivable automation tools.

2. Provide your employees with extensive training

The most critical thing you can do to get the most out of your AR automation software is to instruct your staff on how to use it. This includes instruction on pertinent protocols, software functionalities, and best practices.

Your personnel can maximize software use with adequate training. They would save time learning the platform.

The user interface (UI) of most augmented reality automation software is complex, making training employees tedious.

3. Streamline your accounts receivable process.

Your AR automation software can boost team output by automating workflows and taking over tedious, repetitive tasks. Automated accounts receivable process steps let your personnel focus on more vital duties instead of manual tasks. Automation eliminates errors that can occur while conducting these processes manually.

Once again, the initial stage is to assess and highlight the operations that can be automated using your chosen AR automation platform. Using AI-driven collection management technologies, you can maximize AR management through individualized tactics and predictive analytics.

Your AR automation programs allow you to create multi-step approval procedures, which save time when multiple invoice approvals are required.

Make a to-do list of all the things your AR automation tool can handle, and then put workflows in place to automate them all. That way, you can save time and make sure no mistakes happen.

4. Monitor important finance metrics

Monitoring critical accounts receivable metrics can provide precise insights into effective and ineffective strategies.

You must monitor your key metrics to ensure a steady cash flow into the business or optimize your cash collection strategies.

A compelling accounts receivable automation program can track and enhance important indicators. The following are essential AR metrics to monitor:

These metrics provide a distinct indication of the AR system's performance. We need to investigate AR methods further to find possible bottlenecks or areas for improvement if these figures fluctuate significantly or don't add up.

If you use KPIs correctly, your AR automation will run efficiently, and your finances will stay in good shape.

5. Improve cross-team teamwork

The performance of your accounts receivable is not solely the responsibility of the receivables management in financial management. Each department engages in a unique mode of client interaction, ranging from sales to client service.

The success of AR operations in fulfilling customer experiences and needs depends on establishing a feedback loop that continuously links these departments.

6. Maintain an up-to-date technology stack.

Your accounts receivable management system should link with ERP and CRM platforms to streamline data transfer and synchronization. Ensure that the technology base of your AR automation program is updated and functions without any issues.

When you connect your accounts receivable tools to your CRM, you can see all your customer contacts and financial information in one place. Due to this integration, your accounts receivable staff can view your customers' information in one place, including invoices, payments, and conversations.

7. Increase your proactivity toward customers

Being proactive is a fundamental principle of effective AR management. Chasing late payments affects client relationships and reduces cash flow.

A systematic communication strategy with clients is essential for collections to be influential.

Automating follow-ups lets organizations remind customers of upcoming payments in advance. This keeps clients informed, eliminates payment delays, and improves client-business relations.

Conclusion

A proactive strategy for handling payment concerns is essential for compelling accounts receivable management. Developing a thorough plan for debt collection, collaborating with trustworthy third-party collection agencies, and investing in automation and technology are all part of this. Business risk can be reduced using AR automation software. You can increase efficiency and decrease the likelihood of human error by automating the procedure so that you have a more accurate understanding of the financial health of your business at all times. An accounts receivable automation system can improve your process and reduce risk. Your sales process can be better managed, and decisions can be made with improved tools and real-time data.

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Streamlining Digital Onboarding with ProfileX: A Seamless Experience for Modern Businesses

With ProfileX, businesses gain access to a smart, secure, and scalable onboarding facility that adapts to evolving digital demands. Whether you're aiming to speed up user activation, enhance data accuracy, or streamline compliance workflows, ProfileX provides the infrastructure to make onboarding a strategic advantage, not a bottleneck.

Streamlining Digital Onboarding with ProfileX: A Seamless Experience for Modern Businesses

In the age of digital transformation, a seamless onboarding process is no longer a luxury—it's a necessity. ProfileX offers a reliable onboarding facility designed to simplify user acquisition, enhance compliance, and deliver a frictionless experience for businesses and customers alike.

What is ProfileX’s Digital Onboarding Facility?

ProfileX provides an end-to-end onboarding platform that simplifies the process of bringing new users be it customers, employees, or vendors onto your system. With API integrations, automated workflows, and automated KYC verification, ProfileX minimises manual effort, reduces drop-offs, and ensures full compliance.

This makes it ideal for industries like:

  • Fintech and digital lending
  • NBFCs and banks
  • Insurance companies
  • Debt recovery agencies
  • E-commerce platforms
  • HR onboarding systems

Key Features of ProfileX Onboarding

  1. Digital KYC Verification
    ProfileX automates identity checks using government-issued IDs, facial recognition, and liveness detection—ensuring regulatory compliance while enhancing user experience.
  1. Customisable Workflows
    Whether you’re onboarding customers for a fintech app or employees for an enterprise platform, ProfileX allows you to build personalized workflows tailored to your unique business requirements.
  1. Real-time Data Validation
    Eliminate manual errors and reduce drop-offs with real-time checks and validations. Users receive instant feedback, allowing for a faster and more reliable onboarding process.
  1. API Architecture
    Seamlessly integrate ProfileX into your existing tech stack using its developer-friendly API and SDKs. This ensures flexibility and scalability as your operations grow.
  1. Holistic Profile with Alternative data
    Go beyond KYC with enriched profiles powered by telecom, employment, financial, and social media signals.

How ProfileX Onboarding Adds Value to Your Business

1. Accelerates User Activation

By minimising manual steps and enabling instant identity verification, ProfileX helps you convert prospects into active users faster—reducing onboarding time from days to minutes.

2. Reduces Operational Load

With automation at its core, the onboarding system cuts down repetitive tasks, freeing up internal teams to focus on high-impact initiatives rather than paperwork or follow-ups.

3. Improves Data Accuracy

Real-time validations ensure that only accurate and verified data enters your system, reducing downstream issues and enhancing the overall integrity of your user base.

4. Boosts Customer Satisfaction

A smooth, intuitive onboarding flow improves first impressions. With guided steps, timely feedback, and mobile responsiveness, users are more likely to complete the process without drop-offs.

5. Scales with Your Growth

Whether you're onboarding hundreds or millions, ProfileX scales with your needs. The API- structure and modular design allow seamless expansion as your user base grows.

FAQs

  1. Who can use ProfileX?

Fintechs, NBFCs, banks, Insurance companies, e-commerce brands, debt recovery agencies, any business that needs reliable user onboarding and risk assessment.

  1. How is ProfileX different from traditional KYC?

ProfileX offers a fully digital and real-time KYC process, unlike traditional methods that rely on manual paperwork and in-person verification. It streamlines onboarding with faster, customizable, and secure identity checks

  1. Can we tailor the onboarding experience with ProfileX?
    Absolutely. With DIY onboarding options and flexible APIs, ProfileX integrates easily into any existing system.
23 Oct
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KYC and AML Compliance: Key Differences and Best Practices

Understanding the differences between KYC and AML, best practices, consequences of poor KYC/AML, their screening process, and AML regulations

If the Indian economy has taught us one thing, it’s that Know Your Customer (KYC) alone isn’t enough to prevent financial scams. Illegal activities such as money laundering and terrorist financing are quite notorious in the banking and corporate sectors, which indicates a growing need to find a holistic way to prevent such activities.

Enter Anti-Money Laundering (AML) compliance, the answer to combating financial crimes. While KYC effectively verifies customers' identities and filters out bad players, a recent study showed that 70% of frauds have occurred even after completing KYC processes. This is where AML strengthens the KYC process and deters criminals even further. 

While both concepts are similar in objective, they have underlying differences. Let’s explore how KYC differs from AML and some of their best practices in fintech!

What is Know Your Customer (KYC)?

Know Your Customer refers to the mandatory process of verifying customers' identities. Organisations and financial institutions collect information about their customers in compliance with legal requirements for identity verification and risk assessment. As a critical component of anti-money laundering, KYC is primarily used to prevent financial crimes like fraud, identity theft, etc.

What is Anti-Money Laundering (AML)?

Anti-money laundering refers to the regulations and procedures organisations and financial institutions follow to detect and prevent financial crimes such as money laundering and terrorism. It involves performing extensive due diligence on customers, monitoring their transactions for suspicious activities, and reporting them if a crime is suspected. AML compliance is usually carried out to prevent illegal activities such as tax evasion, political corruption, money laundering, terrorist financing, etc. 

What is the Difference Between KYC and AML?

Know Your Customer and Anti-Money Laundering are legal requirements for businesses to protect against financial crimes. However, they differ in the following ways:

Know Your Customer Anti-Money Laundering
Purpose To verify customer identities and monitor financial behaviour. To detect and prevent money laundering or terrorist financing activities.
Process Involves collecting and verifying customer information such as their name, address, date of birth, documents, etc. Involves risk assessment, reporting, and legal controls over suspicious activities and transactions.
Risk Management Identifying and assessing risks. Mitigating risks associated with money laundering.
Approach Comprehensive, continuous, and follows a risk-based approach. Proactively measures all AML risks and implements holistic policies to reduce them.

Where and When are KYC and AML Required?

To prevent financial crimes, KYC and AML are required in various industries and circumstances. Following both are mandatory for all regulated entities, some of which include:

  • Financial institutions: Before onboarding new customers, assess risks and detect suspicious activity. 
  • Payment service providers: KYC and AML are done before opening digital wallets or activating digital transactions.
  • Cryptocurrency exchanges: Crypto and DeFi platforms implement KYC and AML before allowing users to trade or convert digital assets to prevent money laundering via cryptocurrencies.
  • Gambling and casinos: They are done upon player registration, during large transactions, and withdrawal of funds. 
  • Corporate entities: Large corporations and venture capital firms conduct KYC and AML checks during mergers, acquisitions, or major investments to ensure legitimacy and prevent illicit financial activities. 

What Does the AML Screening Process Look Like?

Organisations and financial institutions typically perform AML screening. They check potential customers against public lists to verify whether they are high-risk individuals or are involved with entities engaging in money laundering or terrorist financing. In other words, they analyse customer information and transactions to verify their legitimacy and identify suspicious behaviours. 

While conducting an AML screening process, you should be on the lookout for a few red flags like usual transactions, use of anonymous entities, unexplained wealth increase, large cash transactions, etc.

There are a few types of screening processes your business can conduct:

  • Sanctions screening: These lists are maintained by government agencies and contain information about individuals or entities deemed national security threats. These are individuals who are prohibited from certain financial dealings.
  • Politically Exposed Persons (PEP) Checks: Under this process, individuals who hold high-profile positions in government or politics may be more likely to engage in financial crimes such as bribery or corruption, making them high-risk individuals.
  • Adverse media sources: These sources include negative news stories that may be associated with the customer being verified. This check ensures that the individual does not portray the company negatively. 
  • Watchlist Screening: Companies check a customer’s information against specific databases containing data about known or suspected criminals. Watchlists are similar to sanction lists but are constantly updated and even employ real-time screening for adequate due diligence.

How does the KYC Process Work?

The KYC process can be carried out both offline and online. Regardless of the method, the following documents are essential:

  • Identification proof: These documents verify your identity. Examples include an Aadhar card, passport, driver’s license, or voter ID card.
  • Address proof: This is used to verify your current address. Utility bills, rental agreements, and even some ID proofs can be used to verify your address.
  • Income proof: A few entities may require proof of income to assess your financial status. Such documents include salary slips, income tax returns, or bank statements.
  • Photographs: One or two passport-size pictures are required as well.
  • Additional documents: Depending on the entity you’re opening an account with, a few more documents, such as a PAN card or business registration documents, might be needed.
  • Self-declaration form: In most cases, you’ll need to fill out and sign a self-declaration form confirming the accuracy of your KYC information, and they’ve been submitted in compliance with applicable laws. 

The KYC process is conducted in the following order:

  1. Collection of information: The applicants first submit their personal information. After which, they are required to fill out an online KYC registration form.
  2. Uploading of evidence: Once their information is collected, the applicants have to validate it with relevant documents. These serve as evidence to prove they are who they say they are. Neokred’s ProfileX takes this a step further with its secure verification feature that implements facial recognition technology to prevent identity frauds.
  3. Verification: Once the forms and relevant documents have been uploaded, they undergo multiple checks to ensure they haven’t been tampered with. The verification process may take time, and the applicants will receive a notification from the entity if their application has been approved. 

What are the Main AML Regulations?

AML regulations in India are primarily governed by the Prevention of Money Laundering Act (PMLA), which mandates businesses and financial institutions to implement robust measures to detect and prevent financial crimes. 

Between 2014 and 2024, the Enforcement Directorate (ED) registered over 5,200 money laundering cases, with 40 convictions and three acquittals. This indicates the threat money laundering poses to the Indian economy, which has led to the necessity of regulatory bodies enforcing AML regulations. 

The Reserve Bank of India (RBI), Securities and Exchange Board of India (SEBI), and Insurance Regulatory and Development Authority of India (IRDAI) are key regulators that have been integral towards the development of robust AML frameworks. More regulations anchored by the PLMA were implemented to address the rising number of financial crimes and safeguard the nation’s economic system:

  1. PML (Maintenance of Records) Rules, 2005: Requires reporting entities to maintain transaction records and submit those deemed suspicious to the Financial Intelligence Unit - India (FIU-IND).
  2. PML (Amendment) Act, 2009: Introduced the concept of “corresponding law enforcement agencies” where information about reporting entities could also be shared with foreign agencies.
  3. PML (Amendment) Act, 2012: Introduced the concept of politically exposed persons, expanded the scope of reporting entities to NPOs and lowered the threshold for identifying beneficial owners.
  4. PML (Amendment) Act, 2015: This was made to align Indian AML laws with international standards by introducing the concepts of “reporting financial institution” and “reporting authority.”
  5. PML (Maintenance of Records) Amendment Rules, 2023: This amendment aimed to bolster AML compliance efforts by widening the scope for reporting entities and customer due diligence requirements. It imposed stricter KYC norms for company secretaries and chartered accountants, including cryptocurrency and virtual digital asset transactions under AML norms. 

How Automation Improves KYC/AML Compliance

Automation has the power to streamline KYC and AML in the following ways:

Online Identity Verification

Businesses can automate KYC procedures and obtain customer identity data through online verification. The process begins with the user selecting their ID document type and uploading pictures. Once the KYC platform screens the documents, users are asked to send a photo of themselves holding the document to verify that they are real people. Biometric checks and facial authentications are done under automated KYCs to verify customers' identities.

For example, ProfileX makes digital identity verification easier with its top-of-the-line KYC API. The platform verifies customer identities in seconds with unparalleled accuracy and validates their information with automated document cross-checking with trusted sources.

Automated AML and Sanctions Screening

Automating AML and sanctions screening is also highly effective in reducing businesses' manual burden of conducting the verification processes themselves. Through automation, companies can build verification flows in compliance with AML/KYC regulations, maximising reliability and protecting them from financial crimes. PEP lists, sanctions lists, watchlists, and adverse media lists are a few sources that automation can use to screen customers for possible risks. 

Transaction Monitoring and Digital Wallets

KYC/AML automation facilitates real-time monitoring of customer transactions and detection of illegal or suspicious activities. Since many users also create digital wallets for online payments, automation tools can verify their identities and continuously monitor their transactions. 

Consequences of Poor AML & KYC Compliance

Here’s a brief overview of some of the consequences companies and financial institutions can face due to poor AML and KYC compliance:

Facilitating Criminal Activities Unknowingly

Poor AML and KYC policies can cause financial institutions to unknowingly facilitate illegal activities such as money laundering and terrorist financing on behalf of criminals. This can expose the entity to risks, so robust identity verification and monitoring procedures are required.

Regulatory Fines and Penalties

Did you know that the number of penalties imposed by the RBI on financial institutions grew 88% over the last three years? What’s worse is that AML and KYC non-compliances contributed to that growth. Regulatory bodies impose strict guidelines that companies must follow to maintain AML and KYC compliance. Failure to adhere to these guidelines will result in fines, sanctions, and legal penalties. 

Reputational Damage and Loss of Customer Confidence

Breaching AML and KYC compliance erodes customer trust and confidence in the entity. Adverse publicity, media scrutiny, and loss of loyal customers are common results of such compliance breaches, which can persuade customers to switch to competitors perceived as more trustworthy. 

Exposure to Greater Financial and Operational Risks

The consequences aren’t limited to the above three; there are more. The entities in question will become more vulnerable to financial scams. They will frequently be subjected to regulatory investigations and incur higher costs for remediation efforts. Loss of business partnerships and profitability are also long-term consequences they’ll have to face. 

Best Practices for KYC/AML in Banking, Crypto, and Fintech

Since banking, cryptocurrency, and the fintech industries are more vulnerable to financial fraud, here are some of the best KYC/AML practices that can be followed to mitigate such risks:

  • Ensuring compliance with AML laws: Properly complying with AML laws and regulations will prevent businesses from incurring hefty fines and penalties for non-compliance. It will also ensure that their reputation and customer loyalty are preserved.
  • Internal controls and audits: Businesses should conduct regular audits and reviews of their KYC/AML policies to ensure there are no weaknesses or loopholes that criminals can exploit to conduct illicit activities.
  • Verified users: Fraudsters use fake IDs and various sophisticated schemes to conduct fraud. Financial institutions should ensure that only verified users can become customers, which can reduce innovative fraud attacks.
  • Enhancing user experience: Financial institutions can optimize KYC/AML process workflows based on applicant risk profiles so they don’t have to pass extra checks. This motivates the customers to complete the process without dropping off in between, thus improving the overall user experience. Neokred makes this possible as the platform’s onboarding workflows ensure reduced customer drop-offs by 24%. 

Conclusion

To sum up, KYC and AML compliance share the same goal of preventing financial crimes. However, while KYC focuses on verifying customer identities, AML aims to detect and prevent illegal activities such as money laundering and other financial crimes. Understanding the key differences between KYC and AML and implementing their best practices will help you streamline and strengthen your compliance efforts. 

With Neokred’s KYC APIs, you can stay ahead of evolving regulations with constantly updated databases, real-time user identity and secure verifications, and more features that offer your customers a seamless onboarding experience. Contact us today to learn more about our KYC platform’s capabilities!

22 Oct
5 Mins

What is Auto Debit, and Why is it Important for Businesses?

Exploring how auto debit facility works, key RBI guidelines, e-mandates, benefits of autopay options, and how to initiate direct debits

Imagine never needing to chase payments or worry about late fees again. Customers often forget due dates for credit card bills or subscriptions, which can negatively impact your business’ cash flow. However, with auto debit, these issues are a thing of the past.

The volume of digital payments made across India have surged, with the total valuation rising from Rs. 2071 crore in FY18 to Rs. 13,462 crore in FY23. Auto debit transactions have been a key driver behind this and are used extensively for making seamless recurring payments. Curious about how auto debit works and why it’s essential for your business? Let’s explore!

What is Auto Debit?

Auto debit is a payment facility issued by debit/credit card providers where funds are deducted from your bank account on a recurring basis.

Whether it's loan repayments, subscription fees, or utility bills, this facility lets you automatically transfer funds on a fixed date every month or year. This is one of the most convenient and hassle-free payment forms as you do not have to worry about the strain of missed EMI’s and can ensure proper cash flows.

It also eliminates the administrative burden of issuing reminders and manually collecting payments.

How Does the Auto Debit Facility Work?

With auto debits, you give permission to a company to collect payments directly from your bank account. You activate the auto debit facility through your bank’s website or application. Once activated, you can set the standard instructions for payment. The payment deductions take place without One-Time Passwords (OTPs) on the scheduled date.

However, to avoid any payment interruptions or possible overdraft charges, you’ll need to ensure that your bank has sufficient balance for a successful transaction deducted automatically.

You can also adjust payment dates or set a maximum limit for debits, providing flexibility in managing your finances.

How Are Automatic Debit Payments Different From Bill Pay?

Feature Automatic Debit Payments Online Bill Pay
Initiation Initiated by the payee with authorization from the payer Initiated by the payer through the bank’s online platform
Process Funds are automatically withdrawn from the payer’s bank account on a preset recurring date Payer schedules the payments to be made to the specific payees, which can either be one-time or recurring payments
Manual Payment Option No manual payment option provided Manual payments can be made
Vendor Access to Bank Information Vendors have access to your bank account information Vendors do not have access to your bank account information
Flexibility Payers can modify payment dates and amounts Payers cannot modify payment dates or amounts, although there may be exceptions depending on the vendors or services

Be Cautious About Sharing Bank Account Information

When it comes to managing your bank account or conducting business or transactions with other entities, safety is typically a major concern.

In FY24, the Reserve Bank of India (RBI) reported bank frauds amounting to more than 139.3 billion Indian rupees. Thus, the importance of safeguarding your bank account information cannot be overstated. 

To safeguard your account, consider these steps before providing authorization:

Verify The Company

Before you provide your bank information, verifying the legitimacy of the entity you are dealing with is essential.

You can start by researching the company by checking out its website, reviews, and business registrations. Additionally, when sharing information with them online, look for secure data transmission, such as Secure Sockets Layer (SSL) certification.

Know Your Rights

You have the right to protect and decide how your financial information is used. Be aware of your rights under regulations like the Information Technology Act (IT Act) and the Digital Personal Data Protection Act (DPDPA). Neokred’s Blutic platform helps you stay ahead of the DPDPA act’s compliance requirements. You can seamlessly manage user consent lifecycles, build user trust with transparent data collection declaration, and get free guidance on data collection and retention plans. Your bank may also offer fraud protection services to safeguard your transactions.

Monitor Account Balances

Ensure you have enough balance in your account before authorizing payments. While some banks offer overdraft facilities, they usually come with significant fees. Similarly, if your account lacks sufficient funds, you may incur an NSF (Non-Sufficient Funds) fee. Regularly monitor your account balances to avoid these unnecessary charges.

Review Your Agreement and its Terms

Before authorizing a payment, read the fine print and understand all the terms and conditions related to recurring payments and how your bank account information will be used. It’s important to understand how you can stop payments or cancel agreements as well.

E-Mandates and Auto Debit Card Payments

E-mandate is a digital payment service introduced by the RBI and the National Payments Corporation of India (NCPI). It allows individuals and businesses to authorize recurring payments from bank accounts.

With e-mandates, customers and businesses can seamlessly manage recurring payments such as SIPs, loans, insurance premiums, etc. as this system eliminates the need for manual labor, paperwork, constant reminders, and late payment charges.

For automatic debit card payments, e-mandates allow you to link your debit card to a merchant and authorize them to deduct fixed or variable amounts of money on a recurring basis. The maximum limit for a transaction via debit card e-mandate is Rs. 15,000. For amounts above that, OTP authentication will be required. In this case, the maximum single transaction limit is Rs. 1 Lakh.

Key RBI Guidelines for Auto Debit Transactions

On October 1, 2021, the RBI announced new guidelines for auto debit transactions to control recurring payments made through debit cards, credit cards, and other prepaid methods. They were also established to ease transaction processes for customers and businesses and to protect them from online frauds.

Here are some key highlights to keep in mind:

Informing Customers in Advance

Banks are mandated to notify customers of recurring payments 24 hours before the due date. After receiving confirmation from the customer, banks can proceed with the transaction. 

Additional Factor Authentication for Transactions above Rs. 15,000

Additional Factor Authentication (AFA) adds an extra layer of security to prevent unauthorized users from accessing your accounts. Once customers receive a pre-debit alert from their banks for recurring payments above Rs. 15,000, they will have to approve the transaction through an AFA in the form of OTPs.

Customers have the option to complete transactions of higher amounts such as insurance premiums or education fees without the need for approval via OTP.

Implementing One-Time Registration

Under the new guidelines, customers are only required to register once, after which they can conduct recurring transactions without an AFA. They can also specify the amount and validity period for subsequent transactions during the registration process.

Providing Opt-Out Options

Customers now have the option to opt-out of any transaction. They are also allowed to view, modify or cancel auto debit payment transactions from their accounts if they cannot make a payment on time.

How to Initiate a Direct Debit from Your Bank Account?

Direct debit is a way of collecting recurring payments directly from your customer’s bank accounts and this form of payment collection is highly advised as it is efficient, cheaper, and offers you higher control in managing your cash flows.

Here’s how to get started:

Step 1: Contact Your Bank

The first step is to get in touch with your bank and let them know that you’d like to join the direct debit scheme.

By verifying a few factors such as your company’s administrative capabilities and financial situation, the bank will decide whether you are eligible to accept direct debits.

Step 2: Choose a Direct Debit Company

The next step is to pick a payment aggregator or a payment service provider to process the payments received. You can choose a suitable platform considering several factors such as pricing, scalability, software interface, ease of use, and customer service provided.

Integration with your accounting software is also another key feature to look into, which is where Neokred shines at - it streamlines payment processing and management giving you maximum convenience and security in the processes. 

Step 3: Get Direct Debit Mandates From Your Customers

Once you’re all set up with your bank and payment provider, you can start collecting payments from your customers.

However, before that, you’ll need to acquire a Direct Debit Instruction (DDI). This document, signed by the customer, authorizes you to collect payments from their bank and it will be valid until it is canceled.

What are the Benefits of Autopay Options?

Autopay options are highly convenient for customers as they can set up auto-payments for their rent, cable, mortgages, to name a few.

Based on the initial authorization and payment details issued by the customer, businesses can automatically charge their customers every month for the services they provide.

Similar to customers, businesses also benefit from automatic payments. See how:

Offers Maximum Time Savings

Manually collecting payments or sending frequent follow-ups to your customers can be cumbersome and time consuming for your Accounts Receivable team. But when payments are set on auto-pilot, the administrative burdens of your A/R team are significantly reduced.

Enhances Customer Satisfaction

Put yourself in the customer’s shoes—late fees and repeated follow-up calls for overdue payments can be frustrating. As a business owner, it’s important to recognize that constant reminders and late payment notices could strain your customer relationships. Auto-payments solve this issue by allowing customers to enter their payment details once and authorize future transactions, removing the hassle of missed payments.

Provides Consistent Revenue

When billing your customers on an automated basis, you consistently receive payments as per the predetermined billing date. That means no waiting around for your customers to make a payment or to send them a follow-up. Since these payments are processed immediately, your business is more liquid. You can fast-track payment processing further with Neokred’s intelligent scheduling that clears the queue of pending payments to avoid any delays.

Promotes Increased Spending

According to a study conducted by Duke University, it was found that both residential and commercial customers increased electricity usage after switching to auto-payments. Although this may seem strange and highly debatable, automatic payments could encourage customers to spend more, assuming they aren’t too concerned about how much they spend on a regular basis.

For example, if you have an OTT-based subscription service, your customers may be willing to upgrade to a higher tier so their family members or friends can also access it.

The Bottom Line

Auto debit simplifies payment processing, allowing businesses to focus on growth rather than chasing down invoices. Whether it’s subscriptions or regular bills, auto debit can keep your cash flow stable and reduce administrative headaches.

Neokred makes auto debits easier with multiple early payment options, automated payment reminders, and real-time payment confirmations. To know more about our platform’s capabilities, contact us today!

Ready to take your customer experience and product to next level with Neokred