A bank mandate is a document that lets a bank know who is authorised to access an account, which can include additional parties besides the account holder. If you want to access your clients’ bank accounts, this may be something to consider, especially given the ever-increasing demand on accountancy firms for outsourced payment services.
Once a bank mandate has been ratified, you will be given your own login and key fob with which to access your clients’ bank accounts, removing the need to share banking logins.
Most banks also offer a number of different access types. You might be given permission to set up payments for your clients, for example, but not to authorise on their behalf, or you may only be given permission to view the bank account in question. These permissions can be tailored to the needs of each client, making a bank mandate a flexible option.
As you scale your business and deal with more and more clients, things can quickly become complicated. You might, for example, have two clients who use the same bank, so you now have two different logins and key fobs to keep track of. It’s easy to imagine a scenario in which you enter the wrong details too many times and end up locking a client’s account.
Realistically, your clients will use a number of different banks, each with their own payment flows and permissions. Additionally, there is no universal standard for payment files, as each bank accepts a slightly different format. All of this adds up to extra training for your staff, and an even greater risk of making an embarrassing mistake.
Setting up a bank mandate can also involve a lot of paperwork for both you and your client, as well as an average wait time of two to three months. Again, as your client list grows alongside your business, setting up multiple bank mandates can quickly become a time-consuming hassle.
We have seen some accounting firms operating their own client bank account to do so and have looked into the benefits and possible restrictions of making payments on behalf of clients through your own client bank account.
Some accounting firms have put segregated client bank accounts in place. Meaning, they request their business customers to deposit funds into the accounting firm’s client account to then go ahead and pay wages or suppliers of the business.
Advantages of a client account
This mechanism comes with the benefit to the accounting firm of controlling the workflow of making bank payments. Instead of getting a bank mandate to access your clients’ bank account, you can simply use one workflow for all clients - definitely a plus from a scalability point of view.
Another benefit of operating your own client account is pricing as you as the accounting firm can negotiate one price for payment fees rather than having to do so separately for all clients.
We totally understand why accounting firm would have gone for this option, however, the regulatory landscape has changed dramatically since the inception of PSD2.
Disadvantages of a client account
Using a client account looks a lot like remittance as defined by the FCA, essentially saying if you take money from your client for the sole purpose of disbursing funds to payees such as employees or suppliers this is considered a regulated activity.
Other industries such as recruitment, or real estate agencies suffer similar challenges. Great news, there are ways to circumvent getting regulated yourself which still might be the right choice for some firms.
A bacs approved bureau allows businesses to directly submit payment files to third party software providers, who then execute payments on behalf of your business. Sound good? Let's delve into the potential benefits and drawbacks.
Why use a Bacs Bureau?
Bacs payments and its practical application particularly the role of a Bacs bureau can be confusing at times. There is plenty options to choose from when it comes to paying wages and suppliers. This guide will hopefully help small businesses owners to make the right choice whether a Bacs approved bureau provides the expected benefits vs alternatives.
When paying employees Bacs is by far the most widely adopted payment type utilised by employers in this country. A bacs approved bureau allows businesses to directly submit payment files to third party software providers (list here) who then execute payments on behalf of your business. Sound good? Let's delve into the potential benefits and drawbacks.
What is a Bacs Bureau?
A Bacs approved bureau enables a business with bank approval to send payments through a Bacs software: You import a payment file to Bacs bureau who then submits payment instruction on behalf of you. This debits a lump sum out of your business bank account without any direct interaction needed with bank.
How to get a Bacs number?
The bank approval is a one-off permission by issuing a Bacs Service User Number (SUN) which is your company's identifier in the Bacs system.
Obtaining a SUN takes is normally takes around 1-3 months requiring the bank to perform due diligence on your business, some banks may have revenue thresholds you need to hit in order to qualify - typically around 2 million yearly turnover.
By using a Bacs approved bureau your minimum contract terms seem to be 1-3 years depending on the provider, and normally require a setup fee of 500-1,000 pounds, along with a yearly fee per company of around 150-250 pounds.
A Bacs approved bureau isn’t charging for the actual bank transfer, this is charged by your bank directly even though they aren’t involved in the payment submission (expect something between 8p to 25p per line + file charge).
Is it worth it for me?
Given you can stomach 3 day clearing cycles with any Bacs direct credit payment it comes down to a few things:
With the right supporting technology, it’s entirely possible to offer a robust and efficient client payment service. Telleroo is an innovative, full-service platform for accounting firms looking to easily make payments on behalf of clients, which eliminates the need for banking or BACS sponsorship.
You can manage payments across all of your clients without leaving the platform, and our well-formulated processes allow for a clear separation of duties - leaving you and your clients in control of the process while saving you from the hours of hassle required to input individual payments.