Beginners guide to Bacs payments

January 29, 2021
We take a look at the most commonly asked questions around Bacs and Bacs payments to help you get started…

Whether you’re new to the payments industry or you’re a finance team thinking about processing Bacs payments for the first time, understanding the basics will help you get up and running quicker and more effectively.



What is a Bacs payment?


A Bacs payment is a bank-to-bank transfer between banks in the UK and is the standard payment type used by businesses in the UK. Bacs is a central clearing house for all UK Banks.



What are the advantages of Bacs payments?


Bacs payments are easy and inexpensive, they help you understand your cash flow with simple and effective reports, they are cheaper than cheques and eliminate the need for postage, and they make reconciliation much easier by generating a single debit from your account so you don’t have to track individual payments.



Are there different types of Bacs payments?


There are 2 core types of Bacs payments:


  • Direct Debit: An instruction from a person to their bank or building society, authorising the organisation they want to pay to collect money from their account. For example your monthly gym membership.
  • Direct Credit: An electronic deposit to your account. For examples your monthly salary.



How long do Bacs payments take?


Bacs payments (credit and debit) take 3 working days to clear.


  • Day 1 (submission day) – the instruction (credit or debit) is sent to Bacs.
  • Day 2 (Processing Day) – the bank processes the request.
  • Day 3 (due date) – the transaction is completed. The funds are moved from the sender account and credited to the recipient account.



What information is required for a Bacs payment?


The minimum information you require is the sort-code, account number, name, amount. For debits, the reference is also mandatory.



Can anyone make a Bacs payment?


Yes, anyone can make a Bacs payment, as long as their bank offers this service. Businesses tend to use a Bacs product or service rather than using bank portals (for example) as it’s easier, faster, and less prone to errors. Or alternatively a Bacs bureau for handling the Bacs transfers on their behalf.



What is a SUN and do you need one to make Bacs payments?


A SUN, or Service User Number, is a unique number for businesses collecting or paying via Bacs. You cannot use Bacs to receive or send electronic payments unless you have a SUN.


As a business receiving and/or paying money electronically through Bacs, you will either have and use your own SUN to facilitate the Bacs process (direct SUN) or, if you don’t have your own, you pay a small commission to a third party to manage it for you (indirect SUN).


SUNs are only issued to businesses who are sponsored by Bacs members (the UK’s major banks). Therefore you need to apply to your bank to make an application or get a bureau to set up a SUN on your behalf but retain actual ownership of it.



Can you make a Bacs payment without a Bacs Service User Number?


Certain banks provide services that allow you to make Bacs payments without needing to obtain a Service User Number, such as Natwest Autopay Online. This gives businesses the ability to make Bacs Payments by expending a limited number of monthly credits, paid via a subscription fee, and subjected to a pre-approved credit limit.



What is a bureau?


A bureau will process and automate Bacs payments and collections on your behalf, thereby removing the need for your own software. This (indirect) method of Bacs submission is often used by companies who don’t want to (or are unable to) do this themselves.



What are Bacs reports?


Bacs reports feedback information on your submissions. This includes Credit payments, Direct Debit collections and Direct Debit Instructions. There are multiple reports produced by the BACS service, each report giving the Bacs user different information. It’s mandatory for some of these reports to be downloaded and acted-upon.



Are there any other payment methods?


Faster Payments and CHAPS are two alternatives to Bacs payments in the UK. Using Faster Payments has the advantage of payments clearing much quicker than Bacs – usually within 2 hours. CHAPS (Clearing House Automated Payment System) is more commonly used for processing larger funds and are usually completed with 1 working day.


The advantage of these payments are that they can be processed quickly but on the flip slide, cancellations due to error can be difficult due to the speed of the service. They are also usually far more expensive, per transaction, than Bacs.



Make Bacs payments with paygate


Here at paygate, we have a long heritage of helping businesses achieve Bacs payment efficiency. Our payment platform is one of the longest established Bacs approved software solutions available on the market. To our customers, we’re trusted experts.

Contact us today to enquire about your ideal Bacs payment solution.


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