What is Bacs?Nizam Yusuf
Bacs is by far the most popular method for sending and receiving business payments in the UK. Having processed “more transactions than the total number of people to have ever walked the earth”, in the world of electronic banking transfers, Bacs reigns supreme.
Continuing to dominate the UK banking industry even after half a century, it is understandable why the word “Bacs” has become synonymous for payments in the United Kingdom. Like the brand name “Hoover”, both consumers and businesses commonly refer to sending or receiving electronic payments as “making a Bacs payment”.
However, under closer examination, Bacs (Bankers Automated Clearing Service) actually refers to the central payment network owned and operated by the 16 major UK Clearing Banks and building societies that make up the membership organisation, rather than the payment itself.
There are two types of UK business payments that can be completed with the Bacs payments system. These are Bacs Direct Credit and Direct Debit.
What is Bacs Direct Credit?
Bacs Direct Credit is a practical option for organisations of all sizes for electronically sending or receiving payments quickly and efficiently into a bank or building society account.
Predominantly used by UK employers for paying wages and salaries, today Bacs Direct Credit handles transactions by businesses of all sizes for a variety of purposes, including, but not limited to:
- Pension payments
- Paying employee expenses
- Settling insurance payments
- Disbursing shareholder dividends
- Issuing refunds
Benefits of Bacs Direct Credit
Time efficient – Bacs Direct Credit is simple to prepare and quick to process, especially when compared to traditional payment methods such as cash and cheques.
Cash-flow control – A regular and fixed Bacs Direct Credit payment schedule allows for greater transparency and month-on-month forecasting.
Cost saving – Bacs Direct Credit significantly reduces risk and security costs associated with cash handling, and directly saves on the cost of administration and postage when sending out cheques.