Is your finance team thinking about processing Bacs payments? Making a Bacs Payment is by far the cheapest payment method, however, access to Bacs isn’t something your high street bank provides out of the box. We have looked into the process of getting set up with Bacs Payment Services, and if it’s worth paying by Bacs vs alternatives.
Bacs payments are typically used to pay salaries and pensions. Despite the advent of Faster Payments this hasn’t changed much in the past decade. We at Telleroo are trying to accelerate the shift away from Bacs to immediate Faster Payments. Financial Controller, or other finance professionals use "Pay by Bacs" and bank payment interchangeably.
A Bacs payment is a bank transfer from one bank account to another, taking three business days to arrive. However, a Bacs payment can also be a Direct Debit, which is the opposite of a bank transfer - meaning your finance team pulls funds out of a customer's bank account. Bacs payments are not same-day payments or instant, but are still the number one bank payment method businesses use.
Bacs stands for Bankers Automated Clearing Services, and is the standard payment type in the commercial world. A Bacs can be a direct debit or direct credit.
A Bacs payment takes three business days to clear. The Bacs process begins with the payment file being submitted to the Bacs system, prior to a cut-off time. On the second day the file is processed by the bank and on the third day, the payment is credited to the recipient’s bank account.
A Bacs transfer, also known as Bacs direct credit, normally arrives very early in the morning on the third day by about 7am. Bacs transfers only send Monday to Friday; even though it is an electronic payment system it takes non-working days off.
Even though a Bacs transfer is just another term for a regular bank payment and is used interchangeably, the ability to make a Bacs transfer doesn’t come by default. Despite having access to a regular Corporate Banking system such as Bankline, or Barclays.Net doesn’t necessarily mean you can make Bacs payments already. A corporate banking system tends to come with CHAPS, next day and same day payments, but not Bacs.
There are two options to process Bacs direct credit payments, or “Bacs out”. You either run it through your bank, or you go to a Bacs Approved Bureau to process your Bacs payments. Either way, in order to make a Bacs payment as a business you’d have to sign up with Bacs in one way or the other. First, we need to understand the concept of a Bacs Service User Number, or SUN.
Bacs Service User number (SUN) status is not automatically given to you from your bank. It’s advisable to get your own SUN, however, some banks offer a non-SUN way to make Bacs payments. This totally undermines the purpose of Bacs because they charge much higher rates. In other words, to take advantage of cheaper fees you’d have to apply for a SUN. If you are a corporate customer you get access to the following payment types:
In order to qualify for Bacs payments you need to apply for a SUN. This is a lengthy and expensive application process through your bank. Once you obtain a SUN you can either make Bacs payments through your bank, or use third party software (Bacs Approved Bureau). If you want to find out more about why you might want to use a Bacs Approved Bureau, see our blog post here.
A Bacs Service User Number, a SUN, is your bank’s approval to process Bacs payments. Your SUN is a six digit number which is your identification in the Bacs payment system.
In order to obtain a SUN you need to go through a lengthy application process. With a SUN you can then either sign up with your bank for Bacs, or you can use third party Bacs software such as Accesspay.
Some banks such as Natwest offer Bacs payments without going through the pain of having to obtain a SUN. However, it would be necessary to sign up to Autopay Online or the equivalent thereof at your bank. Natwest charge £15 a month and £0.35 per Bacs payment. It is capped at 250 Bacs payments per month.
In order to qualify for Bacs you need to apply for a Service User Number (SUN). This can be a lengthy application process and most banks charge a setup fee of £250+. They run a full due diligence on your business. and this may impact your ability to get credit with your bank. It is best to speak to your bank manager to get started with the application for a SUN.
It is probably only worth using Bacs if you have over 500 employees and if you don’t mind slow payment times.
The main benefit of using Bacs is cheaper per payment charges than any other method. You could be paying £0.05 per line rather than a future dated payment in Bankline costing you £0.45.
Bacs payments typically arrive in your bank account by 7am. If a Bacs payment hasn't been credited by 7am, it is very likely you would need to wait until the next working day to receive the payment (best to reach out to your employer if this happens to you). Monzo has got a cool feature that identifies Bacs wage payments a day early.
Yes, Bacs is a bank transfer and the two terms are used interchangeably. There are three types of bank transfers in the UK: Bacs, CHAPS, and Faster Payments. All of these are domestic bank payments in the UK. Only Bacs as opposed to any other type can also be a direct debit payment. It can be confusing at times as most other countries have only got one type of bank payment, i.e SEPA in Europe.
A Bacs payment is by far the cheapest way to make payments when making hundreds of payments per month. When making around 500 Bacs payments per month it should be about 10p per payment based on what we have seen banks charge. On top of bank charges watch out for extra fees including:
Telleroo is a web based banking system, where finance teams can make same day bulk payments without the need for complex Corporate Banking Services.
Telleroo comes with simple workflows enabling you to make hundreds of payments without any training needed. Our regular subscription is £49 a month and comes with 50 same day payments included with each further payment costing £0.39. This makes Telleroo significantly more cost effective than any Corporate Banking Service.
Telleroo is a banking system to make bulk Faster Payments for your finance team. It’s a simple yet robust workflow. Get a free demo account and see for yourself here.
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