small business guide to Bacs
Described as being systemically important to the efficient operation of the UKs financial service sector, Bacs has been at the heart of the UKs payment industry for some 50 years.
In 2018, Bacs became a wholly owns subsidiary of Pay.UK, which has now taken responsibility for Direct Debit, Bacs Direct Credit, the Current Account Switch Service, Cash ISA Transfer Service and the Industry Sort Code Directory.
Since its inception, more than 130 billion transactions have taken place. In 2018 alone 6.4 billion UK payments were made using Bacs services. A new record was set in November 2019, with 124 million transactions processed in a single day, while the value of transactions processed reached £58.8 billion on one day alone in April 2017, another record.
What Is Direct Debit?
A Direct Debit is an instruction from a customer to their bank or building society (sometimes called a payment service provider, or PSP) authorising them to make regular payments to another company, such as a mobile phone provider or a utility company. Account holders can even make charity payments by Direct Debit.
Around 9 out of 10 adults in the UK have at least one Direct Debit. 73% of household bills are paid this way and when asked for their payment preferences, 62 per cent said they preferred to pay their bills this way.
All Direct Debit payments are protected by the Direct Debit Guarantee, a money back consumer safeguard. If anything does go wrong, the customer will get their money back. The Direct Debit Guarantee applies to all Direct Debits and is supported by every PSP which offers Bacs Direct Debit payments.
What is Bacs Direct Credit
Bacs Direct Credit is an easy, safe, secure and reliable means of payment which allows organisations of all shapes and sizes to make payments to an account via their chosen PSP provider
In contrast to cash or cheque payments, Bacs Direct Credit cannot be stolen or ‘lost in the post.’
The popularity of this method of payment can be demonstrated by the fact that over 150,000 organisations in the UK make use of Bacs Direct Credit. It has been widely adopted to pay benefits, wages and salaries.
Almost 90 per cent of the country’s workforce is paid using this method and around one billion benefit payments are made through Bacs Direct Credit.
It is also the preferred way to pay for a range of other financial commitments like pension payments, employee expenses, insurance settlements and refunds
The advantages of Bacs Direct Credit are available to businesses whatever their size and sector and include:
- Saving time and administration costs. With Bacs Direct Credit, the creation and authorisation of a payment file is a simple and inexpensive process.
- Improved cash flow management. The business knows exactly when funds will leave their account.
- Direct cost savings. Businesses can eliminate the use of cheques which saves money and postage costs.
- Better payment terms. If you elect to pay suppliers by Bacs Direct Credit, businesses may be able to negotiate better terms by offering more flexible payment options.