4 min read
Key takeaways
- Standing orders eliminate manual payment processing by automating recurring expenses like rent, utilities and supplier payments.
- Scheduling routine payments in advance with standing orders improves cash flow predictability and reduces administrative overhead.
- Consistent payment timing helps maintain vendor relationships and avoid late fees.
Standing orders automate recurring business payments. By scheduling transfer in advance, standing orders ensure your funds are transferred consistently and securely, eliminating manual payment processing and freeing up time for your business’s other priorities.
What is a standing order?
A standing order is a pre-authorized instruction you give your bank to make regular fixed or calculated payments to a specified recipient. These payments occur automatically at set intervals—such as weekly, monthly or quarterly—without manual intervention. The fund transfers can take the form of a wire, ACH or other electronic transfer, depending on your preference.
How do standing orders work?
Standing orders let you schedule regular payment transactions. Standing orders involve a two-step process:
- Initiation. The account holder sets up the standing order with their bank, specifying the amount, frequency and recipient details. This setup acts as a preauthorized instruction for the bank to execute regular payments without manual input.
- Execution. On the specified dates, the bank automatically transfers the predetermined amount to the recipient’s account. This automated process ensures payments are made consistently and on time.
Standing orders provide your business with a reliable and efficient way to handle recurring financial obligations.
Common uses of standing orders in business transactions
Standing orders can support a broad range of business needs. Examples are:
- Recurring supplier payments. Ensure timely, consistent payments to your suppliers while reducing the risk of late fees and maintaining strong business relationships.
- Lease and rental payments. Automate your monthly lease or rental payments for office or commercial spaces, equipment or vehicles while preserving access to essential resources.
- Loan repayments. Repay loans in regular installments to help your business manage debt efficiently and maintain good credit standing.
- Subscription services. Automate payments for subscription-based services including software licenses and membership fees, ensuring continuous access to these services.
- Employee benefits. Simplify the distribution of regular employee benefits such as gym memberships and transportation allowances.
- Savings plans. Automate transfers to savings accounts or investment funds to support your long-term financial goals.
- Budget allocations. Automate regular transfers to different budget categories, improving financial management and well-structured resource allocation.
- Utility payments. Ensure timely payment of your utility bills including electricity, water and internet services, avoiding service disruptions and late fees.
Benefits of standing orders for your business
Standing orders offer your business several advantages, making them a valuable tool for your financial management:
- Consistency. Regular payment scheduling helps to ensure payments are made on time and promotes steady relationships with your suppliers and service providers.
- Simplified cash flow management. With standing orders, you can predict and plan your cash flow more accurately, reducing the risk of unexpected shortfalls and promoting your overall financial stability.
- Enhanced financial planning and budgeting. By knowing exactly when and how much will be paid, you can create more precise budgets and financial forecasts to support stronger decision-making and long-term planning.
Standing orders vs. direct debits and ACH payments
Standing orders are sometimes confused with direct debits. While the differences may be subtle, each of these two payment types has distinct characteristics:
- Standing orders are initiated by the payer, who instructs their bank to transfer a fixed or calculated amount regularly. For example, your business may set up a standing order to transfer $1,000 into an investment account on the first day of every month.
- In contrast, direct debits are set up by the payee. Unlike standing orders, direct debits allow the recipient to vary payment amounts. For example, you may allow your phone provider to charge your business checking account every month for whatever balance is owed. The amount charged will vary from month to month.
Standing orders give you control over payment timing and amounts, while direct debits allow the recipient to manage incoming funds.
Standing orders also differ from recurring ACH debits: With a standing order, you “push” funds to the recipient. With ACH debits, recipients “pull” funds from your account.
How to set up a standing order
Most banks allow you to set up standing orders online (as, for example, through Cashflow360), by phone or in person. You’ll need to provide:
- Account details: Both your and your recipients’ banking information
- Payment amount: How much to transfer each time
- Frequency: How often (weekly, monthly, quarterly)
- Start and end dates: Launch timing and optional termination
- Authorization: Sign-offs from the financial decision-makers
- Confirmation: Review details and notify the recipient
Best practices for managing standing orders
While standing orders are often considered a “set it and forget it” service, follow these practices to keep them effective:
- Regular reviews. Periodically review all automated payments to ensure they are still necessary and accurate. Adjust amounts or frequencies as needed.
- Monitoring. Set up alerts for standing order transactions to monitor their execution and address issues promptly.
- Documentation. Maintain clear records with terms, amounts and changes over time.
- Contingency plans. Designate backup funding sources for insufficient balance situations or system errors.
We’re here to help
J.P. Morgan offers end-to-end payables and receivables solutions to support your needs and objectives.
To learn more, please contact your J.P. Morgan representative or visit our treasury solutions page.
JPMorgan Chase Bank, N.A. Member FDIC. Visit jpmorgan.com/commercial-banking/legal-disclaimer for disclosures and disclaimers related to this content.
