Standing order

What it means

A standing order instructs the bank to send a fixed amount on a fixed date until someone changes or cancels it. It suits rent, advances, insurance premiums and regular contributions.

It differs from direct debit in leaving control with the payer: the amount does not change without their action. Direct debit gives control to the recipient under a mandate, which suits variable amounts.

For the due date what counts is the day the money reaches the payee’s account, not the day set in the order. If that date falls on a weekend or public holiday, the bank usually executes the order on the next business day and the payment may arrive late.

How it works in practice

In the books standing orders are matched to their basis: the lease, the instalment schedule, the advance assessment. At the monthly close the amount is checked against that basis.

For cash flow planning it helps to hold a list of every standing order with its date. They form the regular outflow that cannot be postponed by a decision this week.

For tax advances and social contributions we set up clients’ standing orders with the exact variable symbol the tax administrator or insurer specifies. A payment with the wrong symbol leaves on time but stays unmatched, and arrears appear on the taxpayer’s tax account.

What to watch out for

After a rate change, the end of a contract or a change in the partner’s account, the order keeps running. Payments go where they should not and take months to come back, if anyone notices at all.

If there is not enough money in the account on the due day, the bank does not execute the order and need not retry it. The company learns this only from a reminder or a statement, and meanwhile default interest is running.