Tuesday, 26 October 2021, 2 minute read
Most people working and living in the United Kingdom have probably received or sent funds via a BACS payment. But what are BACS payments?
BACS payment meaning
BACS (Bankers Automated Clearing Services) is the most common bank transfer payment method in the United Kingdom. BACS payments are used for transfers under £1,000,000 and are popular for their speed, typically taking around 2-3 business days to clear and their cost, between 5p and 50p per transaction. If you've ever made a direct debit, credit transaction or have been paid by an employer, you've undoubtedly received or initiated a BACS payment. A BACS payment is an EFT payment.
We've outlined some of the key advantages in further detail below:
Saves time and administration cost
The most prominent benefits are reducing both time and administration costs. Collating, checking, and preparing cheques along with the relevant remittance advice is a time-consuming task for anybody. However, when transferring funds with BACS, this process is simplified, making payments much more seamless.
Better cash flow management
Primarily, BACS was created to remove cheques from the equation. As we're aware, cheques take time to process and sometimes even bounce at the last moment. However, with BACS, the payment cannot be authorised without the appropriate banking information. As a result, you have a more reliable payment system and easier to manage cashflow.
Direct cost savings
Other transaction methods like cheques cost a lot. You may need to pay postage costs to the bank and stationery fees, which comes out to around £2 per cheque. However, with BACS payments, it'll be around 5p to 50p per transaction. Considering a BACS payment isn't location dependant makes this even more advantageous.
If you own a business, reconciliations are needed to ensure you have the correct amount of money. With payment methods like cheques, they can quickly become lost and unaccounted for, however, with BACS you'll receive a single debit from your account on a specified date. This eliminates the need to track individual payments, as users can often download CSV files showing total monthly debits.
Better payment terms
Overall, BACS payments provide users with much better payment terms than their alternatives. They're inexpensive, only take around two to three days to transfer, and they're not location dependant, because you can create this transaction online or through a mobile application. One of the main sources of BACS payments is direct credit pay-checks to employees, in 2020, these totalled 344 million transactions.
Alternative to BACS payments
Did you know that open banking solutions allow you to enjoy BACS payments benefits without any cons by using Faster Payments? With account-to-account payments, you can pay and get paid instantly and by using Crezco, it's entirely free!