Hearts must have sunk at Concern Worldwide when it realised that, because of an administrative error, it was inadvertently collecting 100 times the direct debit donation amount from almost 25,000 supporters.
To put the error into context, imagine the surprise of a donor, who may have been thrust into the red when a £1,000 sum was collected instead of their usual £10 donation. Plans for supporters’ bank holiday weekends may have been scuppered and some will have been left worrying about whether their other direct debits such as mortgage payments or rent and utility bills might fail and what this will mean for their credit score.
A nightmare situation for donors and the charity, Concern must be deeply worried about how their relationship with supporters may have been damaged and how this will affect the reputation of the organisation as a whole.
Concern has already taken responsibility for the situation, apologised to its donor base and launched an external investigation to establish how it happened. But what can other charities do to ensure it doesn’t happen to them?
There are five simple ways to safeguard your charity against this type of payment error:
1. Reduce risk
Mistakes in your direct debit processing are costly to recover from, both in terms of the financial costs as well as arguably the bigger threat of reputational damage.
Too often, the Bacs processing of direct debits is given to a junior member of the team or to individuals where it is not their core job. Sometimes one person is held responsible for every aspect of the Bacs processing and the huge amount of money that is being debited. Most of the time this may work just fine, but when it doesn’t it has huge consequences, as highlighted in this case.
Charities should review their direct debit system to ensure that it is managed as well as it can be. They should work with a payments specialist – ideally an accredited Bacs Bureau, where your processes and risks are reviewed regularly, minimising any margin for error.
2. Don’t mess with the files
We don’t yet know how the ‘administrative error’ occurred at Concern, but typically this type of error is down to the Bacs file (which authorises the transfer of funds from one account to another) being created or edited manually. Any manual process leaves room for error. Where possible, do not manipulate any files and if you have to, make sure there is an authorisation process where you get someone else to check it has been correctly processed.
3. Prioritise accuracy, even when time is tight
While any such errors tend to be rare, for both Concern and Greenpeace (where a similar issue occurred 10 years ago) these issues occurred before or during a break. For Concern, it was just before the bank holiday and, for Greenpeace, it occurred over Christmas.
Errors are more likely to occur when there are less staff in or key employees off on leave, putting more pressure on those left behind. Charities should always ensure that their workforce has enough time and resources to make sure submissions go through without stress or error.
4. Impose a warning system
Put a system warning in place to ensure the file total you are submitting is within the agreed limits. For example, if the file total is significantly higher than normal, this should trigger an alert for authorisation from a senior member of the team before the file can be submitted. Having a file 100 times the normal monthly value should have been flagged to show that something was seriously wrong and prevented the problems that Concern faced.
5. Make sure you are can issue payment credits (not just debits)
You have the checks and are happy the processes are in place but… what if? Make sure you have a Bacs credit facility linked to your direct debit service user number. Should an error like this occur, you will then be able to quickly credit all debits and worry about the reconciliation afterwards. This will ensure all supporters are credited as soon as possible, reducing any inconvenience to them and the potential fallout of leaving them out of pocket. Direct debit errors of this size and scale are few and far between, but can be very difficult to deal with if you don’t have the right processes set up at the start. Take time to get it right as the reputational risk and cost of getting it wrong can be monumental.
Scott Gray is managing director of the charity payment specialist provider Rapidata Services