What does BACS stand for?
Bankers Automated Clearing System – BACS payments are typically managed by a collection organisation such as ourselves (simplycollect.co.uk). In 2018 there were 4.4 billion payments made via direct debit, with an overall value of 1,327 billion which is around 2 billion direct credit payments. Year on year the use of Direct Debits is growing.
What are BACS payments?
A BACS payment is a bank to bank transfer between any banks within the UK. There are two main types of BACS payments which can be used for payments from one bank to another.
Direct Debit – When you have given another company permission to take money from your account. For example a subscription for a gym membership is taken via direct from a customer’s account.
Direct Credit – This is also known as a bank transfer. This is when someone else puts money into your account. For example this could include your wages being paid into an employee’s bank account.
How are BACS payments made?
Whether you hold a business account or just a personal account, you will have a name on the customer’s card and their sort code and account number. The payee’s details are added to a Direct Debit Mandate which gains the authority to setup a payment from one account to another account via a licensed and authorised provider such as ourselves.
The Direct Debit mandate is then processed from the provider who will debit the funds; they setup a Direct Debit instruction on the payees account. An example of a Direct Debit Mandate can be found below.
Once the Direct Debit instruction is live the payment processer will have the ability to make requests for payments. The BACS scheme allows payment processers to debit payments on the basis that and advance notice of the amount and frequency has been provided to the payee,
All Direct Debits are protected against errors and mistakes via the Direct Debit guarantee.
How long do BACS payments take?
BACS Direct Credit payments and Direct Debit payments take the same amount of time. They both follow on a three working day cycle. The payments get submitted to BACS on day one. They are then processed on day two and then on day three the money will leave the customer’s account. It is important to remember they will only start the process on a working day.
This process is managed by the payment processer.
How safe is making payments using BACS?
BACS is one of the safest ways to collect and make payments. BACS has been responsible for the clearing and settlement of automated payments in the UK since 1968.
BACS payments have been used to make more than 130 billion transactions, and, according to the research, has never misplaced a payment. In 2019 there £4.5billion worth of Direct Debits processed.
Only approved organisations such as SimplyCOLLECT are allowed to collect Direct Debit payments this is done to ensure your payment information is handled safely and securely. The direct debit guarantee will protect customers against any payments that are fraudulently made and or any mistakes.
What are the costs relating to BACS transfers?
The costs of sending a BACS payment depends on the amount you are sending and what bank you are with. Accessing the BACS scheme requires sponsorship from your bank and then ongoing software costs and submission costs. The sponsorship from a bank is rarely granted so most businesses wanting to make use of Direct Debit within their business seek the services of a payment processer just like Simply Collect. The end user user, the person receiving the payment does not get charged for receiving payments.
Are Direct Debits suitable for my business?
Direct Debit is suitable for those businesses where continuous payments are required but also where same day payment is not required.
The use of Direct Debit is suitable for those businesses which wish to keep control of payments. Many businesses access a third party to process and manage the payments such as Simply Collect. We not only provide access to the Direct Debit BACS scheme but we provide an additional service that many third party providers do not, and that is customer management. We take of the administration that arises such as cancellations, arrears, bank account changes etc.