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Advantages of Bacs Payments

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The GoCardless content team comprises a group of subject-matter experts in multiple fields from across GoCardless. The authors and reviewers work in the sales, marketing, legal, and finance departments. All have in-depth knowledge and experience in various aspects of payment scheme technology and the operating rules applicable to each. The team holds expertise in the well-established payment schemes such as UK Direct Debit, the European SEPA scheme, and the US ACH scheme, as well as in schemes operating in Scandinavia, Australia, and New Zealand. See full bio

Last editedMar 20232 min read

The Bacs payment system is the most popular payment method for UK businesses that want a safe and secure way to pay employees and suppliers, and settle bills.

Bacs was originally conceived in the late 1960s by the UK’s banking industry to provide both businesses and individuals with a safe and timely method to process transactions. It has since become the most common method for making bank transfers within the UK, with over 120 billion transactions since its establishment.

Using Bacs today gives you access to direct bank-to-bank payments without any paperwork or the issuing of cheques. There are many other advantages to using Bacs payments, which we discuss below.

Advantages of Bacs payments

Using Bacs payments provides three distinct advantages over other payments systems. These are:

Safe and secure transactions
Bacs payments are inexpensive
Bacs files are supported by most payroll and accounting software

Security is usually the priority when making payments, and Bacs is very reliable in this department. The low fees charged per transaction also make Bacs beneficial for any business making lots of regular payments, such as staff salaries and payments to suppliers. Further, the vast majority of accounting and payroll software options used by businesses can handle Bacs files.

There are also some other less obvious advantages that using the Bacs payment system offers, as described below.

Bacs payment scheduling

Bacs allows you to schedule regular payments via its direct credit or direct debit payments options. This is the reason why the UK Government uses Bacs for pension and welfare payments, and why it is the most popular payment method for employers paying employees. It can also be used for settling insurance payments, disbursing shareholder dividends and issuing refunds.

Timely payments via Bacs

While Bacs is not as fast as the CHAPS payment system, it does still process the payments in a timely manner. Bacs payments take up to two to three business days to clear but will never take longer, regardless of unexpected delays or other issues.

How to collect Direct Debit payments with GoCardless

1.

Create your free GoCardless account, access your user-friendly payments dashboard & connect your accounting software (if you use one).

2.

Easily set up & schedule Direct Debit payments via payment pages on your website checkout or secure payment links.

3.

From now on you'll get paid on time, every time, as GoCardless automatically collects payment on the scheduled date. Simple.

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Bacs reduces administration

Processing multiple payments simultaneously, as businesses need to do when paying their employees, can take a lot of administration. The Bacs payment service makes it a lot quicker and easier to process bulk payments.

Bacs bill automation

By automating bill payments with Bacs, you can further reduce the amount of administration needed to run your business. Paying utility bills takes time and distracts business owners from the real task of growing their business. The automatic electronic payments that are possible with Bacs make the whole process a breeze, freeing up more time for the real work.

Bacs reduces your carbon footprint

The Bacs payment system is paperless, so it can contribute to reducing your carbon footprint by eliminating paper waste and minimising the environmental impact. See more about sustainability at GoCardless.

Disadvantages of Bacs payments

Now that some payment systems guarantee same-day payment clearance, one could argue that Bacs taking two to three days to clear is a disadvantage. However, the original reason for delaying transfers, as declared by banks, is protection against fraud. This makes Bacs safer and more secure. Plus, when you are scheduling some types of payments in advance using Bacs.

Note that Bacs payments only clear on business days, so if you are making time-sensitive payments be sure to factor in the weekend when calculating how many days you need. If you need to pay a supplier on a Monday, you’ll need to process the payment on the Wednesday before and not the Friday.

One legitimate disadvantage is that many banks that use Bacs have a strict cut-off time for transactions to clear within the same week. For example, many banks have a cut-off time of 3pm on Wednesday for a transaction to clear by Friday. Payments made after that deadline may not clear until the following Monday.

We can help

GoCardless helps you automate payment collection and reduce time spent on financial admin. Its bank-to-bank payments system is powered by both Open Banking technology and Direct Debit infrastructure, making it perfectly suited to collecting both regular and one-off payments quickly, easily, and with reduced costs.

Find out how GoCardless can help you with ad hoc or recurring payments.