What is an Automated Clearing System?

Interbacs provides an overview of bankers automated clearing services (BACS) and looks at some of the advantages, and disadvantages businesses may face when using them.

What is an automated clearing system?

An Automated Clearing System is a payment scheme that enables money to be moved electronically between bank accounts through direct debit or direct credit transfers. In the UK, automated clearing systems are encouraged for use where business-to-business transactions occur, thanks mainly to the availability of the Faster Payment Service. This approach predominantly suits low-value transactions.

BACS (BACS Payment Schemes Limited ) was previously known as Bankers’ Automated Clearing System and was the first automated clearing system made available here in the UK. Since its inception in April 1968, BACS has developed and carry many benefits for business-to-business users in particular. Direct debit, BACS Direct Credit and Current Account Switch services are just some of the features that fall under the BACS banner. Other services that have been introduced more recently include the Cash ISA Transfer Service and The Biller Update Service.

Advantages of an automated clearing system?

Some of the key advantages of using automated clearing systems to manage business transactions include:

Reduced time and cost - With the ability to administer payments in bulk, businesses can save on management times, even if payments take up to three days to process. The added benefit of using the BACS system is that it is free to use, so there are no additional costs. So ultimately, you save on employee time taken to manage bulk payments and the cost of the software.

Reduced Risk - With no need to physically go to the bank, the risk of loss, late payments and even theft reduce significantly. Using bankers automated clearing services provides an overall safer and more secure process.

Easier cash flow management - Because the whole process is managed electronically by the banks, cash flow management is easy and efficient. Your business can gain automated access to bank statements to keep track of incomings and outgoings. Cross-referencing and tracking payments is also made easy.

Disadvantages of automated clearing systems

As with anything, using bankers automated clearing systems to manage your business financial transactions does come with its disadvantages. For international businesses, there are limitations on the use of automated clearing systems, and the key restricting factor is that these systems are not ideal for high-volume, time-critical payments.

Other perceived disadvantages of automated clearing systems tend to be that payments can take up to three days to be processed compared to instant faster payments. BACS payments clear on business days, and perhaps one of the more significant disadvantages is that there are strict cut-off times for payments to be sent.

Interbacs automated clearing systems

Interbacs lead the market as a BACS approved bureau and facilities management provider. Regardless of the size of your business, we can get you set up on a banker’s automated clearing system and support you with the management of your business transactions. Combining 30 years of experience, we deliver BACS solutions, and through Interbacs, you can always expect a friendly and knowledgeable approach.

Start saving on time and money today through reliable, professional, and innovative payment solutions and services from Interbacs. For more information about any of our products or services, please contact us on 08444 127 180.