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What are Bacs payments?
A Bacs payment is one of the most common bank-to-bank transfers in the United Kingdom. There are two main types of Bacs payments - Direct Debit and Direct Credit - and in 2020 alone, there were over 6.5 billion made in total. Continue reading to discover everything you need to know about what Bacs payments are, the benefits of using them, and how they’re used.
What are Bacs payments?
Bacs payments are classed as bank-to-bank electronic transfers of funds between banks within the UK.
Direct Debits - one of the two main types of Bacs payments - are utilised to pull money out of a company or an individual’s bank account on a regular basis. The company obtaining the money must first gain permission and give advance notice prior to collecting the money. Direct Debits can be used for any regular payments, including mortgages, rent, energy bills, subscriptions, gym memberships, and more.
The second type of Bacs payment, a Direct Credit, is used when you want to pay people. These can be used to pay salaries, invoices and expenses. You do not have to obtain permission to pay into an individual’s account as you do with Direct Debits, but it is still a good idea to send communication to the user so they identify the money. For instance, if paying wages or a salary to an employee, a pay slip would suffice.
What does Bacs stand for?
Bacs stands for Bankers Automated Clearing Service, and is the platform which acts as the backbone for moving money within the UK.
How do Bacs payments work?
It usually takes three working days to process Bacs payments. On the first day, a company uses the BACStel IP service to transmit electronic files via the clearing service. After that, payments are split and processed to individual banks. Each of the banks then processes the payments on day two, and moves the money on day three, usually just after midnight.
Some of the newer challenger banks, such as Monzo, Sterling and Revolut, have been known to clear funds on day two.
Some payments can even be future dated so they can be set up to 30 days in advance.
Who uses Bacs payments?
A company can use software to process Bacs payments, or outsource the service to a professional Bacs Approved Bureau, such as Interbacs, so they can process them on their behalf.
Almost any company can use Bacs, and every one - no matter the size - can use it for Direct Credits. This is because all companies need to pay salaries and expenses.
Some may wish to use Bacs for Direct Debits, but it is mostly beneficial for companies with recurring payments, or invoices that need to be collected, such as offering a subscription of any kind, or telecommunications and utility companies, storage facilities, data centres, sports clubs, and more.
What is a Bacs Approved Bureau?
A Bacs Approved Bureau is a company that has Bacs approval to submit payment instructions using Bacs software on behalf of its customers. If your aim is to automate all your Direct Debit collections and payments, a Bacs Bureau processes all of them on your behalf.
All Direct Debit Bureau providers are vetted by Bacs and need to be authorised by a sponsoring bank before they can be added to the Bacs bureau list, and they’re also inspected every three years. These measures mean you can be certain that your transactions are in safe hands.
What are the benefits of using Bacs?
Bacs payments are one of the most common and cost-effective ways to move money within the UK, and is the best way to ensure your cash flow is controlled. Furthermore, using Bacs reduces your administration time because you can use references on the payments that allow you to reconcile it with your internal systems.
You can often afford to offer better payment terms, as you know you’ll get regular payments without the need to chase them up.
Bacs is a common, well-established and reliable payment method that most systems support. Bacs is also extremely useful for bulk payments, as the system is designed to work with a large volume of transactions.
Bacs payment services at Interbacs
At Interbacs, our Bacs Bureau Services are ideal for companies that have a Service User Number (SUN), or are in the process of applying for one, and would like to save time and money by removing the burden of internal processing tasks.
One of the main advantages of using our Bureau Services is that payments are cleared directly into your account. Rather than hiring a payment processing team, a single individual and our software can handle all of your payments easily and efficiently.
We assign a fully Bacs trained professional to your business who will remove the stresses of the Direct Debit collection process, and also provide ongoing training, advice and support. An additional reason to choose Bacs approved bureau services from Interbacs is as a contingency service. If your existing software fails for any reason, you can process it through our bureau.