Accept Pre-Authorized Debits for Your Small Business in Canada

For small businesses in Canada—especially those in class-based industries like dance studios, swim schools, and martial arts academies—offering flexible and automated payment options is crucial. One of the most efficient ways to collect recurring payments in Canada is through Pre-Authorized Debits (PADs).

This guide will explain how PADs work, why they’re beneficial for your business, and how you can integrate them into your registration process for monthly memberships and payment plans.

 

What is a Pre-Authorized Debit (PAD)?

A Pre-Authorized Debit (PAD) is an agreement between a business and a customer that allows the business to withdraw funds directly from the customer’s bank account at set intervals. PADs are widely used for subscription services, memberships, and installment-based payments, making them ideal for businesses that rely on recurring revenue.

Key Benefits of PADs for Small Businesses:

• Guaranteed Payments: Unlike credit cards, which can expire or get declined, PADs pull funds directly from bank accounts, reducing the risk of failed payments.
• Lower Processing Fees: Compared to credit cards and third-party payment processors, PADs typically have lower transaction costs.
• Automated Cash Flow: Set up recurring payments once and ensure predictable revenue every month.
• Better Customer Experience: Customers don’t have to manually make payments every time, reducing friction in their experience.

How to Accept PAD Payments for Your Business

Step 1: Choose a PAD Payment Provider

To accept PAD payments, you need a service provider that facilitates direct bank withdrawals. Some popular PAD processing platforms in Canada include:

• Rotessa – A simple and cost-effective solution for businesses of all sizes.
• Stripe (with ACH debit integration) – Ideal for businesses already using Stripe for online payments.
• GoCardless – A global solution that supports automated bank debits.
• Your Local Bank – Some financial institutions offer PAD processing for business accounts.

Step 2: Obtain Customer Authorization

Before withdrawing funds, you need a signed authorization from your customers. This can be done through:

• Digital forms with e-signatures
• Paper authorization forms
• Online registration forms with a built-in PAD agreement

Many businesses integrate PAD authorization directly into their registration forms. This is particularly useful for class-based businesses that offer multiple payment installments.

Step 3: Automate Payment Collection

Once a PAD agreement is in place, you can set up automated withdrawals according to your billing schedule. Examples include:

• Monthly membership fees for a gym or martial arts dojo
• Session-based payments for a dance school or swim school
• Installment payments for sports academies or summer camps

Using a registration system with built-in PAD, like Activity Messenger, can simplify the process of both collecting payments and managing communications with your clients.

Step 4: Ensure Compliance with Canadian Payment Regulations

In Canada, PAD transactions are regulated by Payments Canada. To remain compliant, you must:

• Provide clear terms and conditions in your authorization form.
• Notify customers of any changes to the agreement (e.g., amount, frequency).
• Offer an easy cancellation process.
• Maintain a secure record of all authorization agreements.

Step 5: Track Payments and Manage Declines

While PADs have a high success rate, occasional payment failures can still occur due to insufficient funds or account changes. Having a system that notifies you of failed transactions and allows you to easily retry is critical.

Integrating PADs with Your Registration and Billing System

For businesses that rely on registrations and recurring monthly payments, integrating PADs into your registration forms can make a significant difference. With platforms like Activity Messenger, you can:

• Create online registration forms that include PAD authorization.
• Offer payment plans for more expensive type of programs.
• Send automated reminders and confirmations via email and SMS.
• Offer multiple payment methods, including credit card, Pre-Autorized Debits and Interac e-Transfer.

Final Thoughts

Pre-Authorized Debits can be a game-changer for small businesses that operate on a recurring revenue model. Whether you run a dance studio, a gymnastics club, or a swim school, offering PADs as a payment option can:

✅ Reduce admin work
✅ Improve cash flow
✅ Save you money on transaction fees

Need Help Setting Up PADs for Your Business?

If you’re looking for a registration and payment solution that supports PADs, check out Activity Messenger. Our platform helps class-based businesses automate their registration forms, payment collections, and customer communications—all in one place.

Click here to book a call with an Activity Messenger expert.