Direct Debit Recurring Donation and End of Month accounting issues

Aparna Chidambaram 2

Hi Everyone,

We recently started offering Direct Debit as an option for recurring donors and we've got our first donor sign-up via Direct Debit.

The issue: I just realized after chatting with Blackbaud Support that direct debits do not post on the same day that I run the monthly donations (like credit card transactions). The money is apparently received only 24 - 48 hours after the batch has been run.  While this is not a concern for monthly gifts on the 15th of the month, the delay in receiving money from monthly gifts run on the 30th of the month will affect our month closing with accounting.  So the money may not get into our account the same month but at the beginning of the following month resulting in extra Accounts Receivables entries.


If you are using Direct Debit for monthly donations, how do you deal with this issue of Account Receivables from each month end?

Any suggestions or ideas will be totally appreciated. :-)

Thanks,

Aparna

 

Ann Pennant

Hi

You could show it as an outstanding deposit,
but check IATS 24 hours after the transaction to ensure the funds
are in your bank account.

Thanks!

 

K.
Ann Pennant, CPA CMA

Director
of Finance & Human Resources

Pearson
College UWC  

apennant@pearsoncollege.ca

P 250-391-2407 F 250-391-2412  

650
Pearson College Drive, Victoria B.C., Canada V9C
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JoAnn Strommen

If you don't want to show it as outstanding, my suggestion is to change the processing date of your direct debits to earlier in the month.  Give yourself the days/time needed for them to process.  Don't forget you have to work around weekends also.  It may need to be as early as the 25th of the month.  

Aparna Chidambaram 2

Thank you for the replies.

I have a couple more questions: 

1. If I run the recurring gift batch on 30th of the month, when is the donor's account deducted? Would it be on the 30th?


2. Approximately, when would the money show up in our accounts?


-Aparna

 

JoAnn Strommen

That will depend on your processor.  My file goes directly to bank and file has processing date in name.  If you are using IATS or something else, you may need to check with them if you need the date it is drawn on account.  As to when it appears in your accounts, that depends on processor.  Our bank direct debits hit our account the same day it is processed.

Christine Robertson

Aparna Chidambaram:

Hi Everyone,

We recently started offering Direct Debit as an option for recurring donors and we've got our first donor sign-up via Direct Debit.

The issue: I just realized after chatting with Blackbaud Support that direct debits do not post on the same day that I run the monthly donations (like credit card transactions). The money is apparently received only 24 - 48 hours after the batch has been run.  While this is not a concern for monthly gifts on the 15th of the month, the delay in receiving money from monthly gifts run on the 30th of the month will affect our month closing with accounting.  So the money may not get into our account the same month but at the beginning of the following month resulting in extra Accounts Receivables entries.


If you are using Direct Debit for monthly donations, how do you deal with this issue of Account Receivables from each month end?

Any suggestions or ideas will be totally appreciated. :-)

Thanks,

Aparna

 

If you use BBMS, I recommend downloading the disbursement schedule to use as you make these decisions.  The ACH debits will usually be deposited on the same schedule as the credit card gifts.

Faith Murray

 

We process ours directly through our bank, but we simply advance the post date and gift date on the batch to the actual processing date at our bank. We generally wait to commit the batch until the money has been received. Obviously, it is necessary to isolate ACH deposits into their own batch, separate from other cash/credit card donations.

Christine Adams

For those on the 30th or 31st - I do authorize the business day before to make sure it happens in the same month. The only issue are thos folks that do them online on either December 31st or June 30th.

Aparna Chidambaram 2

Aparna Chidambaram:

Hi Everyone,

We recently started offering Direct Debit as an option for recurring donors and we've got our first donor sign-up via Direct Debit.

The issue: I just realized after chatting with Blackbaud Support that direct debits do not post on the same day that I run the monthly donations (like credit card transactions). The money is apparently received only 24 - 48 hours after the batch has been run.  While this is not a concern for monthly gifts on the 15th of the month, the delay in receiving money from monthly gifts run on the 30th of the month will affect our month closing with accounting.  So the money may not get into our account the same month but at the beginning of the following month resulting in extra Accounts Receivables entries.


If you are using Direct Debit for monthly donations, how do you deal with this issue of Account Receivables from each month end?

Any suggestions or ideas will be totally appreciated. :-)

Thanks,

Aparna

 

Thank you for your replies Everyone...

Another follow-up question:


If I run the direct debit batch on 30th of a month, when do the donors see an actual deduction in their account? If the donors see their donations deducted on the 1st or 2nd of the following month instead of the 30th, is that a concern for donors?

 

Faith Murray

Aparna Chidambaram:

 

If I run the direct debit batch on 30th of a month, when do the donors see an actual deduction in their account? If the donors see their donations deducted on the 1st or 2nd of the following month instead of the 30th, is that a concern for donors?

 

 

Our bank always tells us to allow 24-48 hours (usually 2 business days) for processing after the file is submitted. So a direct debit batch run on the 30th will not show on the donor's account till the 1st or 2nd of the next month. However, that has never been an issue to any of our donors. Some even appreciate a slight delay because sometimes their paychecks don't hit timely. I've had Redbox take as long as 4-5 days to post on my personal checking account. As long as the processing delay is only a day or two most people won't bat an eye.

Joan Perry

We process Direct Debits by sending a NACHA file directly to our bank and do not use IATS or BBMS. Donors have the option to have EFTs (CC & DD) processed on the 5th or 20th of the month - per our printed materials and online options. I send the data to the bank 2 business days prior (i.e. the 3rd & 18th) to meet their processing requirements. This is primarily an issue for those who make online donations/pledges and choose the Direct Debit option - as they can make this choices on the 5th/20th of the month - but I can't process that quickly. I've added notes to our online form indicating Direct Debit donations may take 3-5 business days to process - leaving it up to the donor as to when the gift will process (i.e. don't go online 12/31 and make a Direct Debit gift and expect it to process). Our gift processing through Batch - is usually processed the day after the bank processes it. The gift date in our system = deposit (transaction) date, so that helps with our reconciliation with accounting. We use the reference field to indicate when the gift/batch was actually committed.