Bacs Direct Credit
What is a Direct Credit?
Bacs Direct Credit is a system which enables businesses, large and small, to make payments by electronic transfer directly into bank or building society accounts. It’s simple, secure, and reliable, and it dramatically reduces the time and costs associated with traditional methods of payment processing.
Bacs Direct Credit is increasingly used for all types of business payments, most commonly for paying salaries and wages to employees and regular payments to suppliers, both of which are covered in more detail below. However, there are a wide variety of other applications, where Bacs Direct Credit is the most cost effective solution, some of which are specific to a particular industry sector, for example pensions, employee expenses, insurance settlements, dividends and refunds.
The benefits of Bacs Direct Credit are available to businesses of all sizes:
- Saves time and administration costs – Preparing, checking and collating cheques with the relevant remittance advice is a time consuming task. With Bacs Direct Credit the creation and authorisation of a payment file is a simple and inexpensive process
- Improved cashflow management – Make your money work for you up to the last minute by knowing exactly when funds will leave your account
- Direct cost savings – With Bacs Direct Credit the use of cheques is eliminated, removing the cost of cheque stationery and reducing postage costs, or if cash is used the security risks and costs associated with the collection or delivery of cash, and with storing it on the premises
- Cut down on reconciliation – Bacs Direct Credit generates just a single debit from your account on a specified date, eliminating the need to track individual payments
- Better payment terms – When used to pay suppliers you may be able to negotiate more favourable payment terms by paying more efficiently
How it Works
To make a Bacs Direct Credit payment, the minimum information you require is the sort code and account number of the payee’s bank or building society account. You submit your payment data, which include the above information plus the amount of each payment, via a bureau or direct access depending on which method you choose. The data is sorted into payments to each of the banks and then transmitted to each institution. This data is downloaded into their computer systems and applied to the relevant customers’ accounts and debited to yours. The entire process is simple and efficient – and it takes less than three days from start to finish.
Bacs Processing Cycle
- Input – day 1. Input day is the latest day a business user/bureau may submit a payment file to Bacs for a processing cycle. Payment files must be transmitted to Bacs between 07.00 and 22.30
- Processing – day 2. Files are delivered to the recipient banks which then process each payment
- Entry – day 3 – Payments are simultaneously credited to the recipients’ accounts and debited from your account
As the payer, you remain in control of the process at all times. You decide when each payment will be made. You can submit Bacs Direct Credit payment instructions up to 30 days in advance of the payment date. You can also recall payments after the payment information has been submitted, provided your bank is notified prior to a specific cut off time.
As with Direct Debits there are a number of Bacs reports generated by Bacs to help you manage these payments. An overview of the available Bacs Direct Credit Reports are available here.
Using the Service
To make Bacs Direct Credit payments, there are two different methods for submitting your payment data to the Bacs service. The most suitable one for you will depend on the needs and resources of your business.
- Indirect access – This is via a bank or bureau and is often the most suitable method for smaller businesses or those with a limited number of payments. Banks and bureaux can accept data by fax, telephone, post, or electronically. Additional services such as preparation of payrolls and payslips may also be provided. Your bank will be able to provide details of bureau services which best suit your needs.
- Direct access – Direct submission of your payments file can be faster and cheaper than using a bureau where you will be processing a high volume of payments. Access is via Bacstel-IP, based on internet protocol and using the latest PKI technologies. You will need a PC with internet access and a USB or serial port, plus Bacs approved software. For more information on accessing the service visit www.bacs.co.uk/business, or speak to your bank.
When you decide to introduce Bacs Direct Credit, the first thing to do is to consult your bank who will advise you on the most appropriate and cost effective method for your business, and the facilities you may require. They will also provide you with all the procedural information you will need before authorising you to use Bacs Direct Credit.
Do you still have questions? Contact us to discuss.