The 'All direct debits must have a status of accepted' message will appear when attempting to approve a batch that contains newly created direct debit payments that haven't yet been confirmed.
In order for the batch to be approved:
Ensure the direct debits have a status of Accepted.
Once certain the DDs are valid, click the Accept DDs button within the ribbon at the top of the batch. This will mark them as accepted, and allow the batch to be approved as needed.