Operational changes in businesses are common, but not all businesses are fully equipped with the skills to handle them effectively. Updating the payment instructions is an operational and accounting change that usually follows a contract termination or payment mode switch. Most new businesses using GIRO would perceive this as a one-step method, entailing contacting the bank. However, the process is much more elaborate.

Financial handling of any situation involving partnership termination or payment mode switch necessitates courtesy. All entities involved must stay in sync with the change. Thus, below is a general step that businesses should follow when wanting to terminate a GIRO arrangement with another business.

1. Send an official notice outlining the need to terminate the GIRO arrangement at least a month in advance.

2. Update the payment instructions in the business banking portal after the other party has acknowledged the termination. The business should also inform other parties that a request has been made.

3. Follow up with the partner business after the bank approves termination. It’s best to receive a formal acknowledgement of termination from the other organization involved. 

Why should businesses send a notice before the termination?

1. It allows better financial adjustment: 

Providing advance notice before terminating a GIRO payment arrangement allows both the business and customer ample time to properly adjust their financial operations for the impending change in payment mode. During the notice period, the business can familiarize itself with and train staff on any new billing and collection processes, such as physical invoicing or online portals, that will replace the GIRO setup. The customer also has time to understand the new payment requirements, update their accounting systems, and make budgetary provisions if pricing or terms are changing along with the payment method. This adjustment window prevents abrupt disruptions to the flow of expected income for the business and outgoing payment schedules for the customer. 

2. It ensures regulatory compliance:

For certain industries, businesses need to follow specific procedures and provide evidence when terminating GIRO payments related to fees, levies, or other regulated payment streams. For example, the Ministry of Manpower requires companies that pay foreign worker levies via GIRO to officially notify MOM before requesting the GIRO termination from their bank. 

Similarly, other government bodies, associations, or privately held organizations may have their own compliance protocols for stopping recurring payment setups like GIRO. Sending a formal termination notice helps businesses properly fulfill their obligation to notify relevant authorities of this payment status change based on applicable regulations they need to follow.

Why send an acknowledgment or confirmation after the termination?

1. It preserves relationships: Providing proper notice before terminating a GIRO arrangement shows respect for the customer relationship. Even if parting ways, it leaves the door open for potential partnerships down the road. A good and transparent experience in offboarding makes it easier for other entities involved to consider doing business again. Conversely, an abrupt termination can burn bridges. Maintaining professionalism preserves reputations on both sides.

2. It eliminates confusion:

Failing to give adequate notice about stopping a recurring GIRO payment opens the door to misunderstandings and legal disputes. Organizations involved could mistakenly think services are still active and then claim they were wrongfully charged or an expected payment was withheld. An official termination notice sets clear expectations and avoids potential costly conflicts over billing errors and unsubstantiated claims.

3. It helps retain financial integrity:

Even after a GIRO termination request is submitted, there is always a possibility that a payment could still get processed due to banking errors, delays, or other operational issues. If no termination notice was sent, the other businesses involved may have already accounted for that payment in their books incorrectly. Having to recollect transferred funds then creates a major accounting hassle and potential loss of income for the business that sent the funds. Proper notification prevents these financial discrepancies. If any incorrect transaction gets processed, the other business can promptly inform the sender and work on reconciliation.

What did we learn?

Terminating a GIRO payment arrangement warrants more than just updating banking instructions. Proper procedures entail providing sufficient advance notification to all parties involved, documenting acknowledgements, and ensuring compliance with any relevant regulatory guidelines. Overlooking these critical steps can lead to accounting inaccuracies, strained professional relationships, and potential legal consequences.