How to set up systems for deposits and pre-authorisations

To protect your business from no-shows, last-minute cancellations, and damages, you must configure your payment or booking system to handle customer payments upfront. This involves either taking a deposit (a partial or full payment) or using a pre-authorisation to temporarily hold funds on a customer's credit card. Both methods secure commitment from the customer and provide you with essential financial security before you deliver your product or service.

What's the difference?

It’s crucial to understand the two main tools at your disposal, as they work in different ways and are suited to different situations.

• Deposit / Pre-payment: This is where you physically charge the customer's card and take money at the time of booking. The funds are transferred to your bank account. This is ideal for securing bookings far in advance, covering the initial costs of a custom job (like buying materials), or confirming a high-value service.
• Pre-authorisation (or 'Card Hold'): This is different. You don't actually take any money. Instead, your payment system places a temporary hold on a specific amount on the customer's credit card. The funds are 'ring-fenced' and unavailable for the customer to spend, but they remain in their account. If everything goes smoothly (e.g., the guest checks out without issue), you simply release the hold. If there's a problem, like a no-show or damage to property, you can then 'capture' the held funds.

How to put it into practice

The exact steps will depend on the software and systems you use, but the principle is the same. You should look for settings related to 'Payments', 'Bookings', or 'Policies' within your chosen tools.

1. If you use a booking system: Modern booking platforms for accommodation, restaurants, or appointments almost always have these features built-in. You can create rules to automatically request a 25% deposit for all bookings or to pre-authorise £50 on a card for every hotel room reservation.
2. If you use a payment terminal: When taking bookings manually over the phone, you can use the 'virtual terminal' provided by your payment processor (like Stripe, SumUp, or Zettle). This is a secure webpage where you can manually enter the customer's card details to either charge a deposit or place a pre-authorisation.
3. If you use your own website: If your website has a booking function, the settings will be within your e-commerce or booking plugin. You can configure it to require a payment or card hold before any booking is confirmed.

Best practices

Be transparent! Your cancellation, deposit, and no-show policy must be written in plain English and be crystal clear to customers before they book. Include this information in your terms and conditions on your website and in confirmation emails. This is a legal requirement under UK consumer law and it builds vital customer trust.

• Choose the right tool for the job. Use a deposit for custom work or high-demand bookings. Use a pre-authorisation as a security deposit against damages or to enforce a no-show fee.
• Know the rules. Pre-authorisations expire automatically, usually after 7 days but sometimes up to 30. Check your payment provider's terms so you know how long the hold is valid for.

By setting these systems up now, you create a professional and secure foundation for your business, ensuring you get paid for your time and services.