Do BACS Payments Go In At Midnight?

Managing your cash flow is central to maintaining a financially healthy business. To do this, however, you need to have a granular perspective on when payments are entering and leaving your business. Your business finances need to be carefully orchestrated in order to ensure that vendors and staff are paid on time, and your working relationships remain harmonious. 

Ensuring frictionless payment from the customer is a key part of this, as is managing your BACS payment timings effectively. Most businesses use BACS for paying their employees and subcontracted freelancers, as well as making pension payments. But when can you expect payments to be made into your recipients’ accounts? Are BACS payments made at midnight, or can they be made later in the morning? Understanding when BACS payments are made can help you to master your payment timings and avoid unnecessary overdraft use and any charges that may incur as a result.

Let’s take a look! 

What is a BACS payment?

Founded in 1968, BACS previously stood for Bankers’ Automated Clearing Services. However, it is now known as Bacs Payment Schemes Limited (BACS). BACS is now a subsidiary of Pay.UK. Although other, faster, methods of payment have arisen in recent years, BACS is still the standard bank transfer method in the UK with over 130 billion transfers made in this manner since the scheme was first launched.  

There are two kinds of BACS payments:

• Direct debit – Where your company is authorised to receive payments directly from a bank account for goods/services rendered

• Direct credit – Where your company makes a deposit into another bank account e.g. salary payments

The primary advantage of BACS payments for businesses is that it is eminently affordable and, if you understand the terms of the system, easy to manage. 

Does my business need BACS payments?

In order to make BACS payments, you need to be allocated a service user number (SUN). The application process can be quite lengthy and intensive, as a full due diligence check needs to be carried out for your business. 

Some companies sidestep this by using third-party payment partners. These provide them with a managed SUN which, while not their own, allows them to make BACs payments and manage direct debits. 

When are BACS payments credited?

Many business owners assume that BACS payments are credited to their recipients at midnight on the day of allocation. However, most BACS payments are made between 1am and 7am on any given day. If your employee has not received their wages by 7am on the allocated date, then it is likely that they will have to wait until the next day. 

Of course, this can create friction between your company and its employees, and result in a loss of productivity, money worries for your employee, and a potential employee retention issue for you later down the line. 

Getting to know the payment cycle of BACS payments can help you avoid this unfortunate outcome.   

Understanding the BACS three-day cycle

BACS payments have a three-day cycle that needs to be factored into your lead times to ensure harmonious management of your finances. 

It goes like this:

• Day 1: Your company submits a payment file to the Bacs system. These can only be transmitted between the hours of 7am and 10:30pm

• Day 2: The file is delivered to the recipient’s bank to be processed

• Day 3: After being processed by the recipient’s bank, the payment is settled.   

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.