Right at the end of December is never a good time for major cash outlays. Chances are most of us are broke from Christmas shopping, with that next salary cheque seeming worryingly far off.

Imagine your dismay, then, if a direct debit you’d set up to help a worthy cause didn’t take out the £10 or £20 promised – but £1,000 or £2,000 instead. That was the highly embarrassing situation Greenpeace faced at the start of 2006, when errors with its direct debit management system lead to literally 100 times some agreed amounts being taken from supporter bank accounts.

Thankfully the average mistaken debit was between £200 and £300, according to the charity, which took immediate steps to reimburse anyone affected and was quick to apologise. “It has been embarrassing for us, but it will have proved more painful for our supporters over the bank holiday period,” noted finance director Steven Thomson.

Though most money was back in place by 3 January, the charity has admitted that it expected to lose supporters unhappy with the glitch, which it blamed on a combination of human error and the main finance computer system. It is believed the direct debit transaction was run on a pound, not pence, basis, hence the factor of 100 mistake.

Contacted recently the charity said: “The mistake has been rectified and will not happen again.” Let’s hope so, of course. But was the problem a one-off resulting from a highly unusual combination of circumstances, or does it signal a warning which other non-profits should heed?

The simple truth is we may never know if there are similar cases, warns John Tate, chair of the Charity IT Resource Alliance. “I haven’t come across many instances like this but then charities would keep very, very quiet about things like this,” he says.

“The problem is this comes under the area of security, which is sadly not often high enough on the agenda of the board and the trustees. Yet the fact is, mistakes do get made – as much in manual ways of doing direct debit calculations as computerised ones – and when it happens it can be very damaging.”

Tate points to recent US research that suggests only 37 per cent of IT professionals believe their organisation is effective at detecting data breaches.

What is certain is that as a nation of shopkeepers – and charity donors – we do like to use the direct debit system. According to Voca, the new name for the former BACS (Bank Automated Clearance System) organisation, some £3 trillion worth of money is moved around in this way every year. Over 2.1 billion such transactions were collected in 2005 alone, with at least 15,000 organisations offering direct debits as a way to send money. Earlier this month Voca went live with a totally upgraded payments system capable of processing 5.5 billion transactions to meet rising demand.

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It’s no surprise that charities also want to share the convenience of the direct debit system but, rare as they may be, cases like Greenpeace flag up the fact that no system is perfect. So how can organisations manage their direct debit system as effectively as possible?

The possibly surprising answer is that relying on paper and pen, as we used to, isn’t necessarily the best approach. “It’s always easier to blame the system but more often than not problems with direct debits come from human error,” claims Georgia Leybourne, sales and marketing director of Albany Software, a company that specialises in payment solutions. “Nowadays any direct debit system has to go through very stringent procedures to be approved by Voca, with an awful lot of testing, so we are confident there is great reliability built into these products.”

“Traditionally this has been a very manual, intensive process,” adds Andes Loukianos, sales director of IT services group Touchstone. “Charities have felt they needed to do this, take the extra care, as after all it’s all about taking money directly out of customer accounts. But that meant there were lots of inefficiencies and the constant danger of manual error. The simple fact is that nearly all businesses use BACS perfectly efficiently now and it’s time charities got over their fear and started taking advantage of systematising this side of things.”

Many charities pay a direct debit bureau to process such transactions, or buy software straight from Voca, but that’s not the only option. The Charity Technology Trust says it has produced a dedicated direct debit product for the sector called the Direct Debit Collection Management System.

Meanwhile, Loukianos points out that there are a number of point direct debit solutions that charities can evaluate, such as the Albany (see case study), which is also used by a number of big charities including Cancer Research UK and Comic Relief, Bottomline Technologies and Direct Debit Management. A high-end finance or ERP (enterprise resource planning) system is also likely to have such functionality included.

And there are also a number of e-banking modules that can be easily integrated into a charity’s finance, fundraising, or even customer relationship marketing system. For example, RNIB has been using not so much a standalone system as a direct debit module that integrates with its new system based on Pivotal software and being installed by Touchstone.

“When we moved off old our Visual Alms fundraising package we definitely saw direct debit management as an important box we wanted to tick,” says its ICT manager Demis De Souza. “We’re glad to say that we have been up and running with the new CRM system for five months now and it’s just quietly ticking over in the background, which we see as one of the definite benefits of integrating our activities this way. Yes, we had to look at our business processes and make some investment to get there, but it’s working for us very well now.”

Albany’s Leybourne says it would simply take too long to collect the sums that charities need to operate today without some use of automated direct debit. “It’s too hard, with all the compliance and reporting strictures, to do on the back of a fag packet,” Leybourne warns. “At the same time quite a few organisations don’t know what’s available on the market in the form of dedicated solutions and are spending a lot of time doing this in Access and Excel. It may well be worth seeing if you can save time and resource doing it another way.”

The message is clear: the Greenpeace glitch is probably a rare and very public one-off, but let’s take it as a cue to tighten up direct debit and make it as useful a way of collecting money simply and regularly as businesses are finding it. That way no one will end up at the wrong end of an extra zero or two.

Case Study: Amnesty International

Human rights charity Amnesty International has been using the Albany Software solution for its direct debit work for some three years, says its financial controller Adrian Stockman. “We previously had a pretty flaky system that just wasn’t reliable and had to rely on too much manual intervention from staff,” he says. “Though we never actually lost money as a result we just felt it was too risky.”

The system handles some quarter of a million direct debit transactions a month. The main benefits include savings in the region of £5,000 a year through being able to send out supplier payments and remittances electronically instead of by post, and saving on headcount – the charity no longer has to employ someone to input the data of the 5,000 to 8,000 failed direct debit transactions it may have to handle every month in order for a telemarketing company to follow up on. The software also provides a report of these details automatically and there is work going on finding out how a new smart card based system may help provide increased security protection for a donor’s bank details.

“Another advantage is that we can now do more using the internet, with direct debit information files being fed in and out online. It all goes to help us not deal with paper and helps us get payments resurrected or recollected much faster,” Stockman says.
Overall the move has made the direct debit management process much more reliable. “There are many pluses, but as a charity it’s all about efficiency and saving time – our donations are for the cause we support, not to be spent on administration.”

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