Summary
You can collect Xero invoices by Bacs Direct Debit without a service user number of your own. Connect Stripe, turn on Bacs Direct Debit, and customers set up the Direct Debit from the pay link on your invoice or reminder. The payment is recorded against the invoice in Xero once Stripe confirms it.
- What the customer agrees to: A Direct Debit mandate with their sort code, account number, name, email and address. Stripe emails the mandate confirmation and the advance notice, and the Direct Debit Guarantee applies.
- How long it takes: Stripe says a Bacs payment takes 4 business days to confirm with a mandate in place, and 7 when it has to set up a new mandate first.
- What it costs: Stripe's standard UK price is 1% per payment, with a 20p minimum and a £4.00 cap. Paidnice adds no fee on any plan.
You have moved your regular customers onto Direct Debit, and one of them emails to complain. Your monthly statement listed an invoice that is not even due yet, and they want to know why they are being chased when they pay by Direct Debit.
We have seen exactly this with Paidnice customers. Here is how Bacs Direct Debit works for a business that invoices from Xero, how to collect it from the same link that chases the invoice, how long until Xero shows it paid, and what to do when a debit fails.
Paidnice is accounts receivable automation for businesses on Xero and QuickBooks Online. It offers direct debit for invoices in six bank schemes through Stripe, including Bacs in the UK.
Free: Payment reminder email templatesCopy the reminder emails for before, on and after the due date.What Bacs Direct Debit is, for the business collecting it
Bacs Direct Debit is the UK scheme that lets a business pull a payment from a customer's bank account once the customer has signed a Direct Debit Instruction, known as a mandate. It runs on a three working day cycle.
Bacs describes it as an input day, a processing day, and an entry day on which "the payer debited" (Bacs glossary).
To submit Direct Debits to Bacs yourself, you need a service user number (SUN), which Bacs calls "the unique six digit number allocated to organisations authorised to use the Bacs service". Most small businesses do not.
They collect through a provider that holds the SUN, and Stripe works this way: its mandate says Stripe "collects Direct Debits on behalf of" your business (Stripe Bacs docs).
How to collect a Xero invoice by Bacs Direct Debit
- Connect Stripe to Paidnice and turn on Bacs Direct Debit in your Stripe payment methods.
- Send the invoice from Xero as usual. Paidnice adds a pay link to every reminder, SMS and statement for it.
- The customer opens the link and lands on their customer payment portal for Xero, which lists every open invoice.
- They tick one invoice, several, or the whole balance, and choose Direct Debit instead of card.
- They enter their sort code and account number and accept the mandate. The payment completes on the portal, with no redirect to another checkout.
- The debit shows as pending until Stripe confirms it. Paidnice then records the payment against each invoice in Xero.
There is no paper form, no PDF mandate to post back, and no bank details sent to you by email. The customer types them into the Stripe payment form, not into a message to your accounts inbox.
What the customer agrees to: mandate, advance notice and the Guarantee
Stripe says the mandate "includes the customer's sort code, account number, name, email, and full address". Stripe sends the mandate confirmation and the advance notice emails for you by default, except for enterprise accounts with their own SUN.
Advance notice is where the numbers can look contradictory. The Bacs default is "10 working days plus postal time", but the Direct Debit Guarantee allows notice "as otherwise agreed" (Direct Debit Guarantee). Stripe's mandate sets a 2 working day advance notice period, which the customer agrees to when they sign up.
The Guarantee also gives the payer the right to "a full and immediate refund of the amount paid from your bank or building society" if an error is made.
Stripe adds that there is "no set time limit" for a Bacs dispute, and that you cannot submit evidence to counter one. Keep invoices clear and amounts right, because a disputed debit comes straight back.
How long until Xero shows the invoice paid
Stripe says a Bacs payment takes "4 business days to confirm … when a mandate is already in place and 7 business days when you must collect a new mandate". So a customer's first Bacs payment takes about a working week and a half, and later ones are quicker.
Until then the payment is pending in Paidnice. Once Stripe confirms it, Paidnice records the payment against the invoice in Xero, with the Stripe fee and any surcharge written to the ledger, and reminders stop because the invoice is paid.
Before you mark a Xero invoice paid manually
Check for a pending debit first. If the debit is pending and you mark the invoice paid, the payment Paidnice tries to record later has nowhere to go, and you may be holding the same money twice.
Stop chasing customers who pay by Direct Debit
This is the complaint at the top of this page. Customers who pay by Direct Debit do not want overdue reminders, and some do not want statements that list invoices before they are due.
Xero users handle this with contact groups such as "Direct Debit" and "No Mandate". In Paidnice, put Direct Debit payers in their own group with lighter or no reminders, or add a tag that a policy excludes.
Statement settings can also differ by group, so Direct Debit payers can get a different statement, or none at all. For the reminders everyone else gets, see invoice reminders for Xero.
What Bacs Direct Debit costs
Stripe's standard UK price for Bacs Direct Debit is 1% per payment, with a "Minimum fee of 20p" and a "£4.00 cap", against 1.5% + 20p for a standard UK card (Stripe UK pricing). On a £5,000 invoice that is £4.00 by Bacs and £75.20 by card. Stripe also lists a £5.00 fee for a disputed Bacs payment.
Paidnice adds no fee to a Direct Debit on any plan, including Essentials. You can pass a processing fee on to the customer, and set it separately for Direct Debit and for card.
When a Bacs debit fails
A Bacs debit fails when the customer's bank returns it unpaid, through the system Bacs calls ARUDD, "the automated system used by the banks to return unpaid Direct Debit payments" (Bacs). The usual reasons are not enough money in the account, a cancelled mandate, or a closed account.
In Paidnice, the failed debit shows on the Payments page and the invoice is frozen. No reminder or automatic late fee goes out until you fix it with the customer and unfreeze the invoice.
There is no automatic late fee on a failed debit; charge one manually if your terms allow. The steps for each reason are in what to do when a direct debit fails.
Bacs Direct Debit, card or bank transfer for an invoice
| Bacs Direct Debit | Card | Bank transfer | |
|---|---|---|---|
| Who starts the payment | You, under the mandate | The customer, on the pay link | The customer, from their bank |
| Stripe fee (standard UK) | 1%, min 20p, cap £4.00 | 1.5% + 20p | None through Stripe |
| Time to confirm | 4 business days, 7 with a new mandate | At once | When the customer sends it |
| Matched to the invoice | Automatically | Automatically | Manually, from the remittance |
| Can be reversed | Under the Direct Debit Guarantee, no time limit | Through a card dispute | Only by the payee refunding it |
Most UK businesses offer all three. Bacs suits regular customers and larger invoices, card suits one-off and smaller payments, and bank transfer stays for customers whose accounts team pays from their own payment run. For customers who pay in euros, see SEPA Direct Debit for invoices.
How Paidnice handles Bacs Direct Debit
- Bacs on the pay link: every reminder, SMS and statement links to the portal, where the customer pays by card or Direct Debit through Stripe.
- Every attempt on one page: the Payments page shows pending debits, failed debits, payments waiting on the customer and payments that did not sync to Xero.
- A failed debit freezes the invoice until you fix it, so the customer gets no overdue reminder for a debit they think went through.
- Payment plans by Direct Debit: customers can save their bank account for Autopay, and each instalment of a payment plan is collected on its date (Pro and above).
- No Paidnice fee on Direct Debit, on every plan.
💡 Paidnice insight
The first thing to set up after turning on Bacs is a group for your Direct Debit customers. The complaints we see from Direct Debit payers are almost all about being chased or sent a statement, not about the debit itself.
Frequently asked questions
Do I need a service user number to collect Bacs Direct Debit?
Not if you collect through Stripe. Stripe collects Direct Debits on your behalf under its own arrangement, so you can start without applying to Bacs or a bank for a SUN.
Can I use Direct Debit with Xero without GoCardless?
Yes. Paidnice collects Bacs Direct Debit through Stripe on the same pay link that chases the invoice, and records each payment against the invoice in your Xero organisation.
Is Bacs the same as a bank transfer?
No. A bank transfer is pushed by the payer. A Bacs Direct Debit is pulled by the business under a mandate the payer signed, and it is covered by the Direct Debit Guarantee.
Can a customer cancel a Bacs Direct Debit?
Yes, at any time through their bank. The invoice stays unpaid in Xero, so the customer pays it another way, or sets up a new mandate from the pay link.
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About the editorial team
Ashley is a co-founder and lead developer of Paidnice and has built accounting software for more than 10 years. He builds the ledger connections that put reminders, late fees and payments into Xero, QuickBooks and ERPs such as NetSuite and Business Central. Before Paidnice he co-founded A2X, ecommerce accounting software for Xero and QuickBooks.
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