Ask any finance team about failed debit orders, returned payments and unreconciled exceptions, and you’ll usually get a shrug. It’s the cost of doing business, and we’ve all made our peace with it.
That acceptance is exactly the problem.
Part of it is generational. Anyone with a couple of decades in a finance department remembers what reconciliation used to mean: waiting two weeks after month-end for statements, balancing cheques by hand, then taking a ruler to the page to work through what had happened 45 days ago. That isn’t the world we work in now. We have real-time account access, instant statements, and Excel doing the heavy lifting before anything reaches the accounting package. Set against that history, the hours we spend reconciling in a spreadsheet feel like a win, so few people stop to ask whether there’s still room to do better.
A successful transaction can still be a business failure
A failed banking transaction is one thing; the business impact is another. Businesses don’t run on banking transactions, they run on accounting records, on debtors’ accounts that every transaction has to update correctly.
In a client-centric market, most businesses offer as many ways to pay as possible: debit orders, retailer payments, EFT deposits across various channels. That secures recurring business, but every option adds complexity, and not only when a payment fails. A badly referenced payment can’t be matched to a customer, so it sits unresolved in the journals. The money arrived, yet a successful banking transaction is still a business failure.
Reversals are the harder cases. A debit order goes through, then gets disputed a month later, leaving two separate banking records to update a single debtor, often straddling two financial periods. That affects last month’s reporting, interest calculations, and the picture of what you’ve actually been paid for. It drags into board meetings, where last month’s figures have to be reopened for this month’s banking movements. The cost is real, sometimes visible and sometimes not, and it escalates quietly as the business grows.
Volume isn’t really the issue. This is finance, and every cent has to be accounted for. Process 100,000 collections at a 5% failure rate, or run a school collecting 1,000 a month at 2%, and either way someone has to clear up the fallout. Multiply that across every business collecting on a recurring basis, across every mechanism they use, and in aggregate it becomes an administrative nightmare.
Where it bites hardest
The pain varies by industry. Lenders arguably have the toughest version of it. When a collection fails, what’s at stake is the capital they advanced. Insurers carry upstream reinsurance and legislative requirements around policy payments — every sector has its nuances.
The clearest evidence that this is a genuine problem is the businesses that exist purely because of it. Insurers once managed their own premium collections, but today there are insurance administrators contracted specifically to collect and manage premiums. Third-party payment providers have multiplied, each carving out a piece of the problem for a particular industry. Even the banks took it on, with DebiCheck reducing the likelihood of later reversals from disputes, though even there a balance had to be struck with consumer rights.
Why throwing more channels at it can backfire
When collections fail, the instinct is to add more rails and retry harder. Sometimes that’s right. For loans, where the value at stake justifies the cost of recovery, a multi-rail strategy makes sense. For low-value, tight-margin products like funeral policies, it can quietly cost you more than it recovers. And even when the maths works, more instruments mean more potential failures to manage. There’s often real value in absorbing some operational cost up front, by contacting the customer and managing the relationship before you re-attempt.
This is where DebiCheck earns its place. You can instruct the bank to retry a collection over a few days once money lands in the customer’s account, which means recovery can be largely automated through a single instrument. It isn’t a silver bullet: customer rights still apply, and it doesn’t cover business-to-business collections, so it tends to sit within a broader toolkit alongside Registered Mandate and EFT collections.
There’s a less obvious benefit in the mandate itself. With DebiCheck and Registered Mandate collections, the mandate is submitted electronically through the customer’s own bank for them to authenticate or view. Historically, that mandate lived on a piece of paper the customer signed and filed away, so when they disputed a transaction the bank had no counter-evidence and little reason to question it. Once the terms are visible to everyone in the collection chain, that changes. A customer is less likely to reverse a transaction when the terms they agreed to are openly on record. It costs a little more administratively up front, but saves a great deal of recurring work later.
Treat receipting as seriously as sales
So what separates the businesses that handle this well from the ones quietly bleeding money? The good ones treat receipting with at least as much seriousness as sales. It’s cheaper to keep a customer than to win a new one, and a first failed collection is your first hard evidence that one is at risk of leaving.
Taking receipting seriously doesn’t mean reaching for every tool available, it means understanding your real costs and testing your strategy against them. Collecting across every mechanism without strong cross-instrument reconciliation can work out more expensive than a simpler approach that suits your business better. And receipting isn’t everyone’s core competence. The very existence of insurance administrators shows it’s a specialty, which makes the choice of partner part of the strategy itself.
If I had one piece of advice for a finance or collections lead, it would be this. Whether a payment succeeds is also a signal about the relationship with the customer. Treat it as purely financial and you might reach for more instruments at more cost, without recovering the money and with even less chance of keeping the customer. Pick up the phone instead and offer an alternative — a PayShap request to pay the arrears, for instance — and you stand a far better chance of recovering both the payment and the relationship. Every business is different, but the principle holds: put the customer at the centre.
Written by Pieter Brand, Head of Product at Hyphen