Bank Automated Clearing System

The Bank automated clearing system (BACS) is a scheme for the electronic transferring of funds from one bank account to another account. The account is widespread in the United Kingdom due to the advantages it brings but has also been widely criticized for the rather slow processing time.

Bank Automated Clearing System is usually encouraged for business-to-business (B2B) transactions with repeat or regular customers. The reason for this is that there is a faster scheme now available in the UK called Faster Payment Service (FPS), which is used for low value transactions. For transactions that exceed a value specified in the FPS, the BACs is still used, especially if multiple transactions are expected.

Some of the advantages of using BACs for B2B transactions are listed as:

* Reduced time and cost in administering bulk payments – even if the transaction takes three days to clear the fact that it is automated means less man hours in starting the payment process, which is significant for bulk payments (i.e. more than 100 payments to be processed). BACs are usually a free service so there is no added cost and the reduced man-hours means less employee-time to pay.

* Easier cash flow management – everything is accounted for electronically by the banks and included in the bank statement(s) so tracking and cross-referencing is easy.

* Reduced risk of loss, late payments and theft – no need to physically go the bank, write checks, and remember dates.