How to improve cash flow with Bacs payment automation

For businesses worldwide, cash is king. Companies that manage their cash well have a clear overview of cost versus revenue and can pay their bills while maintaining profits.

Cash flow is vital for business success, and companies can achieve a healthy cash flow in many ways. In this blog, we'll explore how to improve cash flow for your business and how Bacs payment automation contributes.

How does Bacs payment automation improve cash flow?

Automating your payment collection processes provides a range of benefits, not least a vast improvement in cash flow.

With an improved cash flow, you'll be able to manage your finances more effectively, contributing towards the growth of your business.

Let's explore some of the benefits of payment automation in greater detail.

Faster payment processing

Bacs payment automation provides your business with faster payment processing, meaning your company can receive payments more quickly, improving cash flow. Automated payments can be processed and settled much faster than traditional payment methods, which can take multiple days or weeks.

Once the first payment has been authorised, your business is then in control, meaning no more hold-ups for customer delays or missing payments.

By receiving payments faster, businesses can improve their cash flow and reduce the need for additional financing to cover expenses or company growth. This, in turn, leads to more streamlined financial operations.

Reduced administrative costs

Automating your payment processes with Bacs can significantly reduce your company's administrative and payment processing costs. 

It removes the need to pay for cheques or postage, and you can save time by no longer having to process payments manually. Think about the number of staff members it takes to process invoices across your company — implementing automation can streamline these tasks and allow more time for employees to focus on growing the business. This all contributes to greater cash flow and lower expenditure for your company.

Lower fraud risks

A payment automation system reduces the risk of fraud. Using an automated system gives you a greater overview of your finances and can spot irregularities easily.

When accepting payments via traditional methods — such as cheques — you're far more vulnerable to security risks, heightening the chance of fraudulent action and disruptions to your cash flow.

Improved cash forecasting

By automating your payment processes, you'll better understand the money moving in and out of your accounts. Payments are sent and received on pre-agreed dates, so you can easily forecast the budgets available at any given time.

You can track your payments in real-time and get a clear picture of your company's financial health, helping you decide when to pay suppliers and collect customer payments.

Increased efficiency

Automating your payments can streamline and increase the efficiency of your entire payment process. You can set up payment templates for recurring payments and easily change any details as and when required.

By doing so, you'll free up additional time to focus on growing the business, and your overall cash flow will improve as a result.

Better payment accuracy

Payment automation improves the accuracy of your payment process, reducing the risk of error and delays in payment processing. 

By removing the need for manual data entry, your business is less likely to experience mistakes in the payment process, reducing the chance of late payment penalties. Not only will this support your business cash flow, but you'll also maintain your relationships with customers and suppliers.

Implementing Bacs payment automation

Integrating payment automation within your processes is essential for ensuring the system runs smoothly within your business. This may involve modifying your existing processes to ensure you get the most from automated payments, but the benefits are worth it in the long run.

You'll need a Service User Number (SUN) to collect payments using Bacs. A SUN is a six-digit number assigned to every business in the Bacs network, and you'll have to contact your bank to get one.

For smaller businesses that have been established for fewer than three years and have an annual turnover of less than £1 million, obtaining a SUN from your bank may be difficult. However, there are other ways to require a SUN if you still wish to automate your payments.

If you have a SUN, then a Bacs Approved Bureau service might be useful to your business if you want to outsource the hassle and expense of processing payment instructions yourself.

For companies without a SUN, Direct Debit Facilities Management services still allow you to collect Direct Debit payments without the sponsorship of your bank.

A range of options are available to businesses, including Bacs-approved software for those wishing to handle payments internally while enjoying the cash flow benefits that automation brings.

What payment solution is right for you?

With all the options available to businesses, how do you know which one is right for you?

It's important to ensure you're getting the most from whichever solution you choose, so picking the right option is essential.

That's why we've put together a Solution Finder, to help businesses of all sizes find the right payment solution for them.

All businesses are different, so the best payment solution for each company will be different too. Get started on improving your cash flow and enjoying the benefits of automated payment collection by visiting our Solution Finder.