Whether you’re a small, medium or large sized business, efficient Bacs payment processing is essential for a smooth cash flow.

If your business wants to start processing Bacs payments for the first time, or already has a Bacs solution in place, this guide will answer the most common questions about Bacs and Bacs payments to help you get started or find ways to refine your Bacs process.

What is Bacs processing?

Bacs is an electronic payment system that lets businesses make payments directly from one bank account to another. It’s the standard payment method used by businesses across the country, with Bacs acting as the central clearing house for all UK banks.  

What is a Bacs payment?

A Bacs payment is an electronic transfer from one bank to another. There are two different types of Bacs payments, called Direct Credit and Direct Debit. 

• Direct Credits are used by businesses to make payments, sending an electronic deposit directly to a bank account. Direct Credits are commonly used to pay staff salaries or to credit suppliers.
• Direct Debits are used by businesses to collect payments from their customers. The customer authorises the business to collect funds directly from their account, and the business communicates how much will be collected, on what data, and how often the payment will reoccur. Direct Debits are ideal for recurring bills and subscriptions, for instance a monthly gym membership fee.

Being one of the most secure, cost-efficient and convenient types of electronic payment, millions of Bacs transactions are processed every day. 

Processing time for Bacs payments

The processing time for Bacs payments (both credits and debits), usually takes three working days: 

• Day 1 (submission day): The payment instruction (credit or debit) is sent to Bacs.
• Day 2 (processing day): The bank processes the payment request. 
• Day 3 (due date): The transaction is completed, with funds transferred from the sender’s account to the recipient’s account. 

Essential information needed for making a Bacs payment

When making a Bacs payment, you must provide at least the recipient’s sort code, account number, name, and the payment amount. For debits, including a reference is mandatory. 

Who can make Bacs payments?

Bacs payments are accessible to anyone through a bank offering the service. There are also Bacs products and services, which are easier, faster and less prone to errors compared to using bank portals and a Bacs bureau to handle transfers on your behalf. However, before you can begin you will need access to a SUN. 

Understanding SUNs

A SUN (Service User Number) is a unique identifier assigned to businesses that process Bacs payments. Without a SUN, you cannot send or receive electronic Bacs payments.

Your business can attain a SUN in one of two ways. The first is to apply for sponsorship from a major UK bank, which will provide you with your own SUN giving you more control over your payments and data. However, the application process will require your business to meet certain criteria depending on the bank, as well as demonstrate that you can effectively uphold the direct debit scheme rules and maintain low submission errors. While suitable for some businesses this is not always the best option. 

The second and perhaps easier way is to work with a third party to set up and manage an indirect SUN on your behalf. Typically, the best way to do this is to work with a Bacs Bureau, which will carry out the process for you and help with all the manual work involved.  

What is a Bacs bureau?

Bacs bureaus play a crucial role for businesses, by  automating and processing Bacs payments and collections and eliminating the need for dedicated software. A Bacs bureau can also provide more than just payment processing. Their expertise, enhanced Bacs payment processing functionality and compliance support can all provide a much smoother Bacs payment processing experience for your business. Read our blog on “how to choose the best Bacs supplier for your business”. 

Understanding Bacs reports

Bacs reports give valuable feedback on your credit payments, Direct Debit collections, and Direct Debit instructions. Multiple reports are generated by the Bacs service, each offering different information. Certain reports must be acted upon as per payment regulations. 

The benefits of Bacs processing

Bacs payments offer a number of different benefits to your business:  

• Cost-effective: Compared to traditional cheques, Bacs payments are not only cheaper but also eliminate the need for postage. 
• Time-Saving: Reconciling transactions becomes a breeze as Bacs generates a single debit from your account, eliminating the hassle of tracking individual payments. The automated nature of Bacs processing eliminates the need for manual intervention, saving time for both businesses and customers. 
• Security: Bacs transactions are highly secure, reducing the risk of fraud and ensuring the protection of sensitive financial information. 
• Improved cashflow: Businesses can plan their cash flow more effectively with Bacs processing, as payment dates are agreed in advance for direct debits. 
• Customer convenience: For businesses using direct debits, Bacs provides a convenient payment option for customers, making it easier for them to manage their payments. 

Other Payment methods to consider

In addition to Bacs payments, there are alternative payment options available in the UK: 

• Faster Payments: Ensures quicker payment clearance, typically within 2 hours. 

• CHAPS (Clearing house automated payment system): Commonly used for larger fund transfers, usually completed within 1 working day. 

While these methods offer faster processing, be cautious about errors, as cancellations can be challenging. Additionally, they are generally more expensive per transaction compared to Bacs. 

Choose paygate for your Bacs payments

At paygate, we boast a rich heritage in facilitating efficient Bacs payments for businesses. Our payment platform stands as one of the longest-established Bacs approved software solutions on the market. As trusted experts in the field, we’re here to assist you every step of the way. Contact us today to explore your ideal Bacs payment solution. Learn more about the paygate platform here or get in touch to speak to one of our experts.