A guide to batch payment processing

Batch payment processing is a consolidated method of handling multiple payment transactions simultaneously, optimizing financial operations for businesses. By grouping payments together, such as recurring payments, supplier invoices, and payroll disbursements, companies can save time and reduce costs. This automated approach streamlines workflows, improves cash flow management, and minimizes the risk of errors or duplicate payments. Batch payment processing is a secure solution that enhances overall financial performance and efficiency for businesses.

Today’s businesses send and receive high volumes of payments throughout the day. While it’s possible to process each one individually as it’s received, batch payment processing offers an efficient alternative. Batch payments can also be sent out to multiple vendors at the same time, either automatically or manually.  In this guide, we’ll explore the batch payment meaning and give a few examples of how the process works. 

What is batch payment processing?

When you pay multiple recipients through a single bank account transaction, this is called a batch payment or bulk transfer. The full list of recipients appears as a single debit on your bank statement, saving time and potentially money. You can use a variety of different payment methods to send batch payments to vendors. These include:

• Credit and debit cards

• PayPal

• ACH bank transfers

• Wire transfers

To make a batch payment, you’ll need a list of every account or payee as well as the amount to be paid. This list of transactions is batched together and paid out from a single debit account.

Businesses will often use Accounts Payable (AP) automation software equipped with APIs, file importers, and file exchange gateways to help facilitate batch transfers. The software then reconciles these payments into all associated accounts.

How does credit card payment batch processing work?

A secondary meaning of batch processing specifically relates to credit card transactions. With credit card batch payment processing, the merchant authorizes credit card transactions throughout the day. At a designated time or at day’s end, they’ll run all these transactions through the credit card processor at once. This streamlines the process and potentially cuts down on processing fees.

Once the authorization codes are sent to the processor, these are passed on to the customers’ banks for approval. At this stage, the funds can then be sent to the merchant’s bank for payment and settlement.

What is the difference between real-time and batch payments?

The alternative to processing payments in bulk or batches is to process them individually. This is called real-time payment processing. Each invoice needs to be approved and a payment authorized by your controller, CFO, or CEO. By contrast, an AP automation platform consolidates these invoices and payments together for bulk approval.

With credit card transactions, payments can also be authorized and processed in real time. If you opt for credit card payment batch processing instead, authorization requests are sent through all at once, usually at closing time.

When to use manual vs. automated batch payment processing

There are two categories of batch payment processing: manual and automatic.

1. Manual payment processing allows for an irregular schedule based on the day’s supply and demand. It requires hands-on effort from your AP department as invoices are grouped together to be approved at certain intervals. The business must then create journal entries to mark each invoice as paid, reconciling them in any associated accounts.

2. Automatic payment processing sets the batch files to be processed together at the same time each day. Using automated AP or invoicing software, the business can automatically issue and pay invoices at predetermined intervals. The system is responsible for cross-checking, verifying, and reconciling payments.

It’s clear that using automated bulk payment processing software offers numerous benefits. To begin with, it’s far easier to reconcile bank accounts. Rather than dealing with a long list of individual transactions on a bank statement, batch payments group these together into consolidated transactions. Automating the process also reduces the number of steps needed for approval and processing, freeing up employee time. Vendors are more likely to get paid on time with reduced risk of human error.

Key Takeaways

Batch payment processing is a method used by businesses to send and receive multiple payments efficiently. It involves making payments to multiple recipients through a single bank account transaction, saving time and potentially reducing costs. Various payment methods, including credit and debit cards, PayPal, ACH bank transfers, and wire transfers, can be used for batch payments. AP automation software with APIs and file importers is often employed to facilitate batch transfers and reconcile payments.

Credit card transactions

In the context of credit card transactions, the merchant authorizes credit card transactions throughout the day and processes them all at once, usually at the end of the day. This can streamline the process and potentially reduce processing fees.

Real-time payment processing

On the other hand, real-time payment processing involves processing payments individually, requiring approval for each invoice separately. Batch payment processing consolidates invoices and payments for bulk approval, typically through an AP automation platform.

Manual and automatic batch payment processing

There are two types of batch payment processing: manual and automatic. Manual processing allows for an irregular schedule based on supply and demand, requiring hands-on effort from the AP department. Automatic processing uses software to issue and pay invoices automatically at predetermined intervals, handling verification and reconciliation – reducing the number of steps needed for approval and processing.

Benefits of automated batch processing

Automated bulk payment processing offers several benefits, such as easier bank account reconciliation, reduced processing steps, time savings, on-time payments, and decreased risk of human error. Vendors are also more likely to get paid on time.

GoCardless is a global payments solution that integrates with over 350 partners, including top accounting, invoicing, and AP software. GoCardless allows you to set up and collect multiple recurring payments directly from customer bank accounts to reduce awkward conversations over late payments. You’ll retain greater visibility over incoming payments, both individually and in bulk batches, all for an improved workflow.

Case Study: Deputy

Deputy, a platform designed to simplify work for shift workers, sought to enhance customer engagement by introducing bank debit as a payment option. To achieve this, they needed a global payments partner with payment gateway capabilities and integration with their subscription billing platform, Zuora. GoCardless, a certified Zuora partner, proved to be the ideal choice. Within three months, Deputy successfully implemented an automated Direct Debit system, thanks to GoCardless' expertise and support.

According to Scott Westbrook, Director of Business Systems at Deputy: 

The implementation team was fantastic at talking us through what the customer journey looks like, what the different schemes' requirements are, as well as the mandate information we need to be supplying to the customer upon sign up.

The benefits of automating payment processing through Direct Debit were remarkable. Scott explained: 

GoCardless has a massive impact on the business because it helps us improve cash flow. As soon as we get payments in our bank, that's cash that we can invest in our aspirations for growth.

Additionally, the company saw a significant reduction in debt chasing, allowing the finance team to focus on more beneficial tasks.

Customers also experienced the advantages of bank debit. Scott noted: 

Customers get notified two to three days before the payment hits their bank. They also don't need to worry about fraud like they do with credit cards, and bank accounts don't expire, so they'll never need to update their details.

The success of the bank debit implementation led to a growing preference among Deputy's customers. 

The company, with support from GoCardless, is considering additional payment innovations, including leveraging GoCardless' expertise to improve adoption among US customers by promoting ACH.

The partnership between Deputy and GoCardless exemplifies a shared ethos of simplifying operations and giving time back to customers to focus on meaningful work. Scott concluded, 

We can help

Setting up payment collection is fast and efficient with GoCardless. By automating the payment collection process, GoCardless drastically cuts down the administrative responsibilities of managing and tracking invoices for your team. 

GoCardless makes it quick and easy to get started with no contracts or long-term commitment required. You can set up one-off or recurring payments in the merchant dashboard in just a few clicks. GoCardless automatically creates and sends all the necessary forms, doing all the heavy lifting for you. You can also connect to GoCardless via over 350 partner apps, such as Xero and Salesforce.

Discover how GoCardless can automate payment collection, making it easier for you to concentrate on what matters most – your business growth.

FAQ: Batch payment processing

What is bulk vs batch payments?

Bulk payments and batch payments are two terms often used interchangeably in the realm of payment processing, but they have distinct differences. Bulk payments refer to a large volume of individual transactions processed in a single action, usually initiated manually or through an automated system. These payments are typically sent to multiple recipients and can be customized to include unique amounts or details for each transaction. 

On the other hand, batch payments involve grouping multiple transactions into a single batch, where they are submitted for processing as a collective entity. These transactions are often processed simultaneously, streamlining the payment flow and enhancing efficiency for businesses. 

While both bulk and batch payments offer advantages in handling high volumes of transactions, understanding their nuances can help businesses choose the most suitable payment processing method for their needs.

What is the difference between batch processing and transaction processing?

Batch processing and transaction processing are two distinct methods employed in payment systems, each with its own advantages and use cases. Transaction processing involves the immediate authorization and processing of individual payment transactions, typically in real-time, where each transaction is assessed independently for approval or decline. This method is commonly used for point-of-sale transactions, online purchases, and other scenarios requiring instant payment verification. 

Batch processing involves the aggregation of multiple transactions into a batch, which is then submitted for processing as a collective unit at a predetermined time. This method is particularly useful for handling large volumes of transactions efficiently, as it allows for streamlined processing, settlement, and reconciliation. 

While transaction processing offers immediate results, batch processing excels in managing high volumes of transactions in a structured and automated manner.

What is the best example of batch processing?

When it comes to batch processing, one of the best examples is the handling of payroll in businesses. Payroll batch processing involves consolidating all employee salary and benefits information into a single batch, which is then processed as a collective unit. This method allows businesses to efficiently calculate and distribute employee payments, considering factors such as hours worked, deductions, and taxes. By using batch processing, companies can automate the payroll process, reducing manual effort and ensuring accuracy. 

Other examples of batch processing include recurring subscription payments, invoice processing, and bulk payment disbursements. Batch processing proves particularly valuable in scenarios where large volumes of transactions need to be processed simultaneously, streamlining operations and enhancing efficiency.

What are the top 2 benefits of batch payments?

Batch payments offer several advantages that businesses can benefit from. Two of the most prominent benefits of batch payments include enhanced efficiency and simplified reconciliation. 

Firstly, batch payments streamline the payment process by consolidating multiple transactions into a single batch. This consolidation reduces the time and effort required to initiate and process individual payments, resulting in improved operational efficiency. Secondly, batch payments simplify reconciliation procedures. With batch payments, businesses can reconcile their accounts by matching a single batch entry against the total sum of transactions within that batch. This simplifies the reconciliation process, minimizes errors, and provides a clear audit trail for financial record-keeping.