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Direct Debit is used by nine in ten UK consumers to pay some or all of their regular bills because it offers so many advantages. It is the only payment method with a money back guarantee giving  customers complete reassurance, knowing they are protected by a number of safeguards.

This blog addresses the questions:

  • What is paperless direct debiting and what are the business benefits?

  • How does it work?

  • How to integrate with your SAP ERP system if you are using FI-AR (Accounts Receivable)?

The blog has a specific focus on the UK BACS service although similar requirements exist in other territories such SEPA within the eurozone.

BACS is owned by pay.uk.  Pay.UK is the recognised operator and standards body for the UK’s retail interbank payment systems.  They provide the digital payments networks used by the UK’s banks, building societies.  Pay.uk was created in July 2017 (as the New Payment System Operator) and launched as Pay.UK in 2018, bringing the three national retail payment schemes – the BACS Payment System, the Faster Payment System and the Cheque and Credit Clearing Company (now the Image Clearing System) – together, into a single, consolidated operation.

What is paperless direct debiting?

Paperless Direct Debit enables organisations to sign up customers for Direct Debit collections for example over the telephone, Internet, telephone keypad, face-to-face or by interactive TV.

It speeds up and simplifies the sign-up process, whilst at the same time further increasing an organisation's administrative cost savings. It is more convenient for customers too, with no forms to complete or the possibility of delays.

An organisation obtains the customer's payment service provider (PSP) account details and then lodges the DDI (Direct Debit Instruction) with that PSP via AUDDIS (Automated DD Instruction Service). Paperless Direct Debit is therefore only available to organisations using the AUDDIS service and who can satisfy additional criteria.  Organisations may be subject to annual reviews of their Paperless Direct Debit process and procedures and failure to comply with the Scheme Rules may result in the removal of sponsorship and exclusion from the Direct Debit Scheme.

In order to operate paperless DD, an organisation requires a SUN or Service User Number. A SUN is your house bank’s approval to process BACS payments. The SUN is a six-digit number which is your identification in the BACS payment system.  Many organisations operate multiple SUN identities where they use direct debit for different products or services.

Main data flows with BACS for paperless DD organisations

As well electronically recording and validating a customer’s DD mandate (bank details, collection amounts and schedule etc), organisations must use the following data flows or integration with the BACS service:

  1. AUDDIS (Automated DD Instruction Service)

AUDDIS enables organisations to send new Direct Debit Instructions to their customers' payment service provider (PSP) electronically, instead of in paper format. AUDDIS automates the transfer of Direct Debit Instructions from collecting organisations to the paying PSPs via the BACS service. You must then send confirmation to the customer within three working days of their verbal or internet instruction.

Any invalid Instructions rejected by the paying PSPs are returned via the BACS messaging service and reported on the AUDDIS Bank Rejected Direct Debit Instruction Report which is also available electronically.

  1. DD Collections

A collection file is used to generate DD instructions.  For organisations that operate paperless DD, correct bank posting keys must be used to distinguish an initial DD collection, on-going collection, repeat collection and a final collection.

Typically, collection files would be generated electronically each working day.  A BACS payment takes three business days to clear.  The BACS collection process begins with the payment file being submitted to the BACS system, prior to a cut-off time.  On the second day the file is processed by the bank and on the third day, the payment is credited to the recipient’s bank account.

  1. ADDACS (Automated DD Amendment and Cancellation Service)

ADDACS is an electronic messaging service allowing payment service providers (PSP) to notify service users if changes are made to a customer's Direct Debit Instruction (DDI), for example when a DDI is cancelled or when an account has been transferred to a new PSP using the “Current Account Switch Service” or “Bulk Payment Redirection Service”.

Changes are passed to service users via the BACS service using ADDACS advices, speeding up the process and improving accuracy.  ADDACS advices are made available either via automatic updates or manual reports that can be downloaded from BACS software.  Receiving ADDACS via electronic messages allows an organisation to streamline their process, reduce administration cost, improve customer service and improve cash flow by reducing collection delays and indemnity claims.

  1. ARUDDS (Automated Return of Unpaid DD Service)

ARUDDs is the automated system used by the banks to return unpaid Direct Debit payments. The ARUDD report listing the unpaid collection is made available to the service user via the BACS Payment Services Website.  Returns can be triggered due to circumstances like a cancelled DD or insufficient funds.

Like ADDACS, ARUDDS messages can be downloaded as a report or made available electronically.  Receiving ARUDDS messages electronically is again recommended for process efficiency, improved customer service and cash flow.

How to connect to BACS?

Connecting to BACS is either achieved directly or indirectly by using a BACS Bureau.  Most organisations connect directly and this is achieved via BACSTEL-IP.  BACSTEL-IP is a multi-layered online submission channel and the largest Public Key Infrastructure (PKI) community in the world. It provides organisations with a fast, secure service for submitting, tracking and viewing payment files at any time, from anywhere, as well as the ability to collect reports.

As a direct submitter there are two ways to access BACSTEL-IP: using software that BACS has approved for BACSTEL-IP and using a secure website called BACS payment services.  The following link provides a list of BACS approved software.


How to Integrate paperless DD with SAP?

Most SAP customers are using FI-AR (Accounts Receivable) to manage their sales ledger.  Neither SAP Business Suite and S/4HANA provide full support for the end-to-end business process.  Within the standard solution, It is possible to manage bank details within the customer master (or business partner within S/4) and generate DD collection files using the payment program (F110/F110S).

In order to support more fully the paperless DD process, it is therefore necessary to undertake some developments on a project basis.  SAP Services offer an accelerator to introduce some additional customizing and developments.  It is important to understand that it is an accelerator and will require [1] integration with your BACS software, [2] customization of correspondence, e.g. company logos and [3] possible integration with your website for DD capture.

The solution is available for both business suite and S/4HANA and provides the following functionality:

  • Maintenance of the DD mandate including bank details, mandate status and collection status.

  • Generation of the AUDDIS file.

  • Import and processing of rejected AUDDIS records.

  • Import and processing of ADDACS records.

  • Import and processing of ARUDDS records.

  • Import and processing of DD Indemnity claims.

  • One off AUDDIS process to convert paper-based to paperless DD mandate.

The screenshot below is the transaction/Fiori app used to import ARUDDS files each day.  Within the processing of these records, the transaction is responsible for recreating debt, updating the mandate status and issuing correspondence (letter or email) to notify the customer.

System Screenshot

The billing schedule and amounts would typically be managed by a sales order, the loans module or even within a legacy billing system that has been integrated with SAP Financials.

The solution has been adopted by a number of private and public sector organisations in order to better streamline the integration of the BACS processes with their ERP system.  In the absence of such support, manual steps are required to perform actions including the generation of AUDDIS files, updating customer details, reopening debt and issuing customer correspondence.

SAP does have plans to introduce some of this functionality within S/4HANA beginning with Contract Accounting within S/4HANA Cloud.  Please regularly consult the SAP Roadmap Explorer and use the search term “AUDDIS”.



Paperless direct debiting offers advantages of process efficiency, improved customer service and cash flow for an organisation.  However full integration with your back office ERP system is a requirement.

Please share your feedback or questions in a comment.  Please follow my profile in order to receive updates on new blogs for this topic and others.

You may find the following community groups interesting when considering how to extend your ERP system to cover paperless direct debit.