Bacs is responsible for a range of UK payment schemes, including Direct Debit and Direct Credit. Discover more about Bacs and how you are able to access their schemes in this article.

Who are Bacs?

Bacs Payment Schemes Ltd (Bacs) is the not-for-profit company responsible for managing the schemes behind the clearing and settlement of UK automated payments Direct Debit and Direct Credit.

Founded in 1968, Bacs has provided services which have continued to grow throughout its history. Bacs was responsible for more than 6.34 billion payments during 2017; a trend which promises to continue over the coming years.

As of May 2018, Bacs became a wholly owned subsidiary of the New Payment System Operator (NPSO). While Direct Debit, Direct Credit and other Bacs-related schemes are managed by the same team, the services now fall under the remit of the NPSO.  The organisation has been tasked with migrating existing Bacs and Faster Payments Schemes and the Cheque Credit Clearing Company to a more modern, secure and Simplified Payments Platform (SPP). The move has been set out by the New Payments Architecture (NPA), a new infrastructure set to improve the payments ecosystem, and is set to roll out to market over the next 5 years.

What is Direct Debit?

The most well-known Bacs payment service, Direct Debit, is an automated payment service which allows organisations to automatically take an agreed-upon amount from the bank accounts of customers every month.

In order to gain authorisation for this payment, businesses must receive a completed Direct Debit mandate from the customer. In short, a mandate lays out both the amount you are authorised to take and how regularly you can take payments.

The benefits of Direct Debit?

The most obvious benefit of accepting Direct Debit is, of course, the improved cash flow that comes from having your incoming payments automated. Customers who have to make a payment each month, will naturally forget or attempt to delay when their own cash flow isn’t good. However, Direct Debit removes those worries by empowering your business to ‘pull’ the money from their account, rather than relying on customers to ‘push’ their payments to you.

The improvement to your business cashflow will allow you to better plan for the future, whilst your staff focus on activities to grow your business, rather than attempting to recover missed payments.

To discover more about the benefits of Direct Debit, click here.

What is a Direct Credit?

The partner service to Direct Debit, Bacs Direct Credit, is a method of easily paying any outgoings your business may have. Its most commonly used to pay suppliers or salaries and other employee-related expenses such as pensions, dividends, refunds and more.

In fact, almost 90% of the UK workforce receive their salaries via Direct Credit payments today, making it one of the most trusted payment methods in the country.

The benefits of Direct Credit

A major benefit of the Bacs Direct Credit system is the speed of payments. It’s incredibly easy to set up, and once done, it means you don’t have to worry about actively paying your regular expenses.

With Direct Credit, you also have full visibility of each outgoing payment and its predicted pay date, allowing for improved forecasting and more effective financial planning.

As one of the cheapest payment methods, paying by Direct Credit will also decrease the costs involved in making payments, allowing for this budget to be reallocated to other areas of the business. All Bacs payment services also come with impeccable levels of security, having managed over 125 billion payments to British banks over the years.

What are the costs?

Making payments via Bacs payment services is incredibly cheap, costing just pennies per transaction. However, there is the extra costs involved in managing Direct Debits through software.

Accepting payment by Direct Debit requires you to use Bacs-approved payment software, which can be a costly upfront investment. You also need to factor in the cost of regular upgrades and the specialist knowledge resource within your team to manage the software and maintain scheme rule compliance. These costs can quickly add up and could make Direct Debit too expensive for smaller companies or start-up organisations.

Using a Bacs-approved bureau to manage your collections will dramatically reduce these costs. What’s more, you’ll also be able to draw on decades of specialist knowledge, which is just a phone call away. This is why more than 50% of organisations use a bureau to submit their Direct Debits and Direct Credits, rather than managing submissions in-house.

How to make payments?

To make a payment via Bacs, you’re required to have specific information about the businesses or individuals you make payments to or take payments from.

In order to collect by Direct Debit, you’ll need the name of the person you’re taking the payment from, along with their bank name, account number and sort code. Similarly, with Direct Credit you’ll need the name of the payee plus their bank name, account number and sort code.

Once you have this information (alongside a signed mandate for Direct Debit payments) you’ll be able to use the Bacs payment services to either pay or collect funds from that individual, whether this is through your bank or via a Bacs bureau like First Capital Cashflow.

Security measures…

When making payments, it’s natural to be concerned with the security measures involved, especially as cyber security and payment fraud becomes an increasingly fraught topic.

Bacs payment services have incredibly stringent security measures, with the highest level of TLS security and strict measures on who can use the service. These are just two of the reasons behind the 125 billion safe payments made in its history.

First Capital Cashflow and Bacs

First Capital Cashflow is a Bacs-approved, FCA-authorised, ISO 9001-certified Direct Debit bureau. Established over 15 years ago, we’ve been processing payments for businesses, public sector bodies and charities for a long time, consistently innovating payments technology.

If you’d like to discover how Direct Debit could help your business thrive, you can contact one of our team either by calling us on 0344 8266 700 or Request a Call Back.

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