Bacs payments, as well as the role that Bacs bureaus play, can be confusing at times. This guide will hopefully help small business owners to make the right choice on whether a Bacs approved bureau is right for them and will set out the expected benefits vs alternatives. The good news is, that there are plenty options to choose from when it comes to paying wages and suppliers.
Bacs is by far the most widely adopted payment type for paying employees. It's utilised by employers up and down the UK. A bacs approved bureau allows businesses to submit their payment files directly 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.
A Bacs approved bureau enables a business with bank approval to send payments through a Bacs software: You export a payment file to a Bacs bureau who then submit payment instructions on your behalf. This debits a lump sum out of your business bank account without any direct interaction needed with the bank. To do this, you need to get a Bacs number.
The bank approval is given when a business is issued with a Bacs Service User Number (SUN). This is your company's identifier within the Bacs system.
Obtaining a SUN takes 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 in yearly turnover.
By using a Bacs approved bureau your minimum contract term would be 1-3 years, depending on the provider and normally requires 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).
Even if you can stomach the 3-day clearing cycles (only on business days), with any Bacs direct credit payment it comes down to a few things:
Running your payroll payments through a Bacs bureau might be the perfect option if you have a stable amount of employees who get the same payment every month. However, the system is decades old and there may be better alternatives out there for you: