An Introduction to Bacs Payments and Collections
For a business entity in the UK, there are many means to send and receive payments to and from your customers, sellers, and workforce. The most cost effective and productive method is to utilize the Bacs service.
Bacs is an Automated Clearing House owned and controlled by the main clearing banks in the UK. Bacs Payments are entirely electronic, with funds being available to the beneficiary on the third day of a three day clearing and settlement cycle.
Unlike the domestic clearing systems in most countries, Bacs permits direct corporate access in to the clearing system, either by using Bacs Software such as that furnished by Bottomline Technologies, or through a Bacs Approved Bureau. Bacs software works on a set of industry defined standards, meaning that a corporate only needs one Bacs software solution irrespective of how many banks they hold accounts with.
Bacs works under two separate schemes; Direct Credit, and Direct Debit.
Direct Credit is used to make payments directly into bank accounts. These payments could be supplier payments, expenses payments, payroll and other similar payments. Using Direct Credit will permit an organisation to easily manage and control outgoing funds, at a fraction of the cost, and with the fraction of the effort of other payment methods like cheque. Bacs payments can be dated up to 30 days in advance, making it easy to schedule funds transfer.
Direct Debit is used to collect planned payments from UK bank accounts, and is controlled to guarantee that the individual or organisation being collected from is protected against fraud or misuse of this Bacs service. Direct Debit collections range from utility bill collections, council tax, through to subscriptions to sports clubs or to other organisations. If an organisation wants to collect using Direct Debit, then they will also need to engage with their bank that will sponsor them on to the service, a method of managing the Direct Debit collection process, and they will also need a method of submitting the files in to Bacs. Although it is possible to use a Bacs Approved Bureau to do this for you, the greater part of Direct Debit users will utilize Bacs software to transmit their collections directly in to the service.
As Bacs software is strictly tested under the Bacs Approved Software Scheme (BASS) an organisation can be convinced that the software they use will be suitable for this purpose and that it will work correctly in terms of connection to the service, validation, and handling of errors.