Why use a Bacs bureau?

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Posted on
September 14, 2021
Topics
Bacs payments
Accounting
Banking

Why use a Bacs bureau?

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.

Using Bacs payments

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.

What is a Bacs Bureau?

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.

How 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.

Bacs pricing

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).

Is it worth it for my business?

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:

  • Bacs submissions to initiate banks transfers with any Bacs bureau needs to be authorised with a physical smartcard. This can be a blessing from a security point of view, however, for end-to-end workflow automation this is a show-stopper.
  • When paying the same people every month, in other words with a stable set of payees, this is exactly what you are looking for. That said, having to deal with a high fluctuation of payees or if you have to pay people on a weekly basis, this will put you at risk of bounce backs. The only way to find out is to regularly check your Bacs reports on the Bacs website, this is only accessible by logging in and manually checking PDF reports.
  • Getting a SUN as a smaller business seems to be a pain to begin with. Sometimes banks might reject you outright, or you would need to wait months to get what you need
Bacs bureau alternatives

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:

  • Upgrade to commercial banking at your business bank, will allow you to submit payments through similar workflows to Bacs approved bureaus. Similar to Bacs software, it can be archaic at times and is not available at all banks (physical key-fobs, no APIs supported).
  • Online payment platforms such as Telleroo can make all payments with one single payment transfer (are not bound to any banking limits or Bacs cycles). You can design fully automated end-to-end workflows, use the Telleroo API, or simply import bank files from payroll software.