In today's digital age, the world of payments has become faster and more convenient than ever before. However, with so many different payment methods available, it can be confusing to understand how long each method takes to clear. In this article, we will demystify Bacs and Faster Payments, two popular payment methods in the UK, and take a closer look at their respective processing times.
The Importance of BACS and Faster Payments for Payroll
BACS payments and Faster Payments are critical to effective payroll management for company owners. BACS payments are particularly popular for regular, predictable transactions like payroll due to their reliability and ability to schedule payments in advance. This reduces the administrative burden and the possibility of errors or missed payments, ensuring your staff receive their wages on time, every time.
On the other hand, Faster Payments provide the ability to transfer money almost instantly, making them an excellent option for emergency payments, bonuses, or resolving payroll errors quickly. They can be made 24/7, which provides flexibility in managing finances and responding to unexpected payroll needs.
In both cases, using these payment services in your payroll system promotes timely payment to employees, enhancing your company's reputation as a dependable employer. They also simplify the financial management aspect of business operations, freeing up valuable time for company owners to focus on growth and strategy.
The sections below delves deeper into each type of payments, and what you need to know to best use them for your business.
What is a Bacs Payment?
Bacs, which stands for Bankers' Automated Clearing Services, is an electronic payment system used for transferring funds between bank accounts in the UK. It is commonly used for paying salaries, bills, and direct debits. Bacs payments are processed in batches, and the clearing cycle typically takes three working days. This means that if you initiate a Bacs payment on a Monday, it will likely clear by Thursday.
How Long Does a Bacs Payment Take to Clear?
The processing time for a Bacs payment is generally three working days, but there are a few factors that may affect the actual clearance time. Firstly, the day of the week the payment is made can impact the processing time. Payments made on a non-working day, such as weekends or bank holidays, will take longer to clear. Additionally, the time of day the payment is initiated can also affect processing times. Payments made later in the day may not be processed until the following working day.
Factors That May Affect Bacs Payment Processing Times
Apart from the day of the week and the time of day, there are a few other factors that may affect Bacs payment processing times. One such factor is the efficiency of the payer's bank. Some banks may have faster processing times than others, so it is worth considering this when initiating a Bacs payment. Additionally, any errors or discrepancies in the payment details can lead to delays in processing. It is important to double-check all the information before making a Bacs payment to ensure smooth and timely processing.
Understanding Faster Payments
Faster Payments, as the name suggests, is a payment method that offers quicker processing times compared to Bacs. It is typically used for smaller transactions and provides near-instant transfer of funds. Unlike Bacs, Faster Payments are processed individually and do not rely on batch processing. This means that payments made through Faster Payments can clear within seconds.
How Long Does a Faster Payment Take to Clear?
Faster Payments are designed to be processed quickly, and in most cases, funds are transferred almost instantly. However, there are a few factors that may affect the processing time. Firstly, the participating banks and their systems can impact the clearance time. If both the payer's and the payee's banks support Faster Payments, the transfer is likely to be completed within seconds. However, if either bank does not support Faster Payments, the transaction may take longer to clear.
Differences Between Bacs and Faster Payments
While both Bacs and Faster Payments are popular payment methods in the UK, there are some key differences between the two. The most significant difference is the processing time. Bacs payments typically take three working days to clear, while Faster Payments offer near-instant transfers. Another difference is the maximum amount that can be transferred. Bacs payments have no maximum limit, while Faster Payments have a limit of £250,000 per transaction.
Choosing The Right Payment Method for Your Needs
The choice between BACS and Faster Payments for payroll depends on a variety of factors, such as the nature of your business, cash flow, payroll frequency, and the urgency of payments.
BACS payments are typically favoured by many businesses for payroll due to their high reliability and the ability to schedule payments up to three working days in advance, ensuring that salaries are paid consistently and on time. This method is well-suited for businesses with a stable payroll that doesn't vary significantly from month to month.
Faster Payments, however, could be beneficial if your business needs to make immediate payments. These could be used for one-off payments, bonuses, or to rectify payroll errors quickly, as the funds are usually available in the recipient's account within seconds.
Both methods have their benefits, so it's a good idea to consider what's most important for your specific business needs. A mix of both payment methods could also be an option, using BACS for regular salary payments and Faster Payments for one-off or urgent transfers. Always consult with a financial advisor or your bank for personalised advice.
Once you’ve run payroll with Onfolk, you have the choice to either pay your team through our Wise integration or download a bank file tailored specifically to your bank’s needs, so you can schedule your BACS payments ahead of time.
FAQs
Bacs Payment made on Tuesday - when will it clear?
If a Bacs payment is made on a Tuesday, it will likely clear by Thursday. This is because Bacs payments take three working days to process, and Tuesday is considered as the first working day in this scenario. Therefore, if you make a Bacs payment on Tuesday, you can expect the funds to be cleared by Thursday.
Bacs payment made on Wednesday - when will it clear?
If a Bacs payment is made on a Wednesday, it will likely clear by Friday. Similar to the previous scenario, Wednesday is considered as the first working day, and the payment will take three working days to clear. Therefore, if you initiate a Bacs payment on Wednesday, you can expect the funds to be cleared by Friday.
Onfolk Makes Managing Payroll and HR Simple and Stress-Free
The benefits of combined payroll and HR software is that you save a tonne of time with admin tasks relating to running your business all the while saving money on expensive accountants and HR consultants.
Onfolk is a modern, cloud-based platform built for startup founders and business owners employing a diverse team. Our platform combines a HR software as well as an almost fully automated payroll, so all your employee and pay data is in one place, accesible at all times.
As your employee data syncs automatically with your payroll, it takes 3 minutes every month to run. This also means you only need to keep one system updated, and your employee data and payroll are always free of discrepancies.
On top of being simple and fast to use, Onfolk provides you with other tools key to building your team effortlessly: 2-click employee onboarding and offboarding, customisable task lists, integrations with Xero, Quickbooks and your pension provider, fully customisable people metric dashboards and reports, and so much more.
If you use Slack to communicate with your team, Onfolk integrates with Slack too - get reminders for employee birthdays and anniversaries, as well as who is joining soon or on holiday that week.
Running a business comes with so many hats - Onfolk takes care of payroll and people admin for you, so you can focus on growing your team and business instead.
In today's digital age, the world of payments has become faster and more convenient than ever before. However, with so many different payment methods available, it can be confusing to understand how long each method takes to clear. In this article, we will demystify Bacs and Faster Payments, two popular payment methods in the UK, and take a closer look at their respective processing times.
The Importance of BACS and Faster Payments for Payroll
BACS payments and Faster Payments are critical to effective payroll management for company owners. BACS payments are particularly popular for regular, predictable transactions like payroll due to their reliability and ability to schedule payments in advance. This reduces the administrative burden and the possibility of errors or missed payments, ensuring your staff receive their wages on time, every time.
On the other hand, Faster Payments provide the ability to transfer money almost instantly, making them an excellent option for emergency payments, bonuses, or resolving payroll errors quickly. They can be made 24/7, which provides flexibility in managing finances and responding to unexpected payroll needs.
In both cases, using these payment services in your payroll system promotes timely payment to employees, enhancing your company's reputation as a dependable employer. They also simplify the financial management aspect of business operations, freeing up valuable time for company owners to focus on growth and strategy.
The sections below delves deeper into each type of payments, and what you need to know to best use them for your business.
What is a Bacs Payment?
Bacs, which stands for Bankers' Automated Clearing Services, is an electronic payment system used for transferring funds between bank accounts in the UK. It is commonly used for paying salaries, bills, and direct debits. Bacs payments are processed in batches, and the clearing cycle typically takes three working days. This means that if you initiate a Bacs payment on a Monday, it will likely clear by Thursday.
How Long Does a Bacs Payment Take to Clear?
The processing time for a Bacs payment is generally three working days, but there are a few factors that may affect the actual clearance time. Firstly, the day of the week the payment is made can impact the processing time. Payments made on a non-working day, such as weekends or bank holidays, will take longer to clear. Additionally, the time of day the payment is initiated can also affect processing times. Payments made later in the day may not be processed until the following working day.
Factors That May Affect Bacs Payment Processing Times
Apart from the day of the week and the time of day, there are a few other factors that may affect Bacs payment processing times. One such factor is the efficiency of the payer's bank. Some banks may have faster processing times than others, so it is worth considering this when initiating a Bacs payment. Additionally, any errors or discrepancies in the payment details can lead to delays in processing. It is important to double-check all the information before making a Bacs payment to ensure smooth and timely processing.
Understanding Faster Payments
Faster Payments, as the name suggests, is a payment method that offers quicker processing times compared to Bacs. It is typically used for smaller transactions and provides near-instant transfer of funds. Unlike Bacs, Faster Payments are processed individually and do not rely on batch processing. This means that payments made through Faster Payments can clear within seconds.
How Long Does a Faster Payment Take to Clear?
Faster Payments are designed to be processed quickly, and in most cases, funds are transferred almost instantly. However, there are a few factors that may affect the processing time. Firstly, the participating banks and their systems can impact the clearance time. If both the payer's and the payee's banks support Faster Payments, the transfer is likely to be completed within seconds. However, if either bank does not support Faster Payments, the transaction may take longer to clear.
Differences Between Bacs and Faster Payments
While both Bacs and Faster Payments are popular payment methods in the UK, there are some key differences between the two. The most significant difference is the processing time. Bacs payments typically take three working days to clear, while Faster Payments offer near-instant transfers. Another difference is the maximum amount that can be transferred. Bacs payments have no maximum limit, while Faster Payments have a limit of £250,000 per transaction.
Choosing The Right Payment Method for Your Needs
The choice between BACS and Faster Payments for payroll depends on a variety of factors, such as the nature of your business, cash flow, payroll frequency, and the urgency of payments.
BACS payments are typically favoured by many businesses for payroll due to their high reliability and the ability to schedule payments up to three working days in advance, ensuring that salaries are paid consistently and on time. This method is well-suited for businesses with a stable payroll that doesn't vary significantly from month to month.
Faster Payments, however, could be beneficial if your business needs to make immediate payments. These could be used for one-off payments, bonuses, or to rectify payroll errors quickly, as the funds are usually available in the recipient's account within seconds.
Both methods have their benefits, so it's a good idea to consider what's most important for your specific business needs. A mix of both payment methods could also be an option, using BACS for regular salary payments and Faster Payments for one-off or urgent transfers. Always consult with a financial advisor or your bank for personalised advice.
Once you’ve run payroll with Onfolk, you have the choice to either pay your team through our Wise integration or download a bank file tailored specifically to your bank’s needs, so you can schedule your BACS payments ahead of time.
FAQs
Bacs Payment made on Tuesday - when will it clear?
If a Bacs payment is made on a Tuesday, it will likely clear by Thursday. This is because Bacs payments take three working days to process, and Tuesday is considered as the first working day in this scenario. Therefore, if you make a Bacs payment on Tuesday, you can expect the funds to be cleared by Thursday.
Bacs payment made on Wednesday - when will it clear?
If a Bacs payment is made on a Wednesday, it will likely clear by Friday. Similar to the previous scenario, Wednesday is considered as the first working day, and the payment will take three working days to clear. Therefore, if you initiate a Bacs payment on Wednesday, you can expect the funds to be cleared by Friday.
Onfolk Makes Managing Payroll and HR Simple and Stress-Free
The benefits of combined payroll and HR software is that you save a tonne of time with admin tasks relating to running your business all the while saving money on expensive accountants and HR consultants.
Onfolk is a modern, cloud-based platform built for startup founders and business owners employing a diverse team. Our platform combines a HR software as well as an almost fully automated payroll, so all your employee and pay data is in one place, accesible at all times.
As your employee data syncs automatically with your payroll, it takes 3 minutes every month to run. This also means you only need to keep one system updated, and your employee data and payroll are always free of discrepancies.
On top of being simple and fast to use, Onfolk provides you with other tools key to building your team effortlessly: 2-click employee onboarding and offboarding, customisable task lists, integrations with Xero, Quickbooks and your pension provider, fully customisable people metric dashboards and reports, and so much more.
If you use Slack to communicate with your team, Onfolk integrates with Slack too - get reminders for employee birthdays and anniversaries, as well as who is joining soon or on holiday that week.
Running a business comes with so many hats - Onfolk takes care of payroll and people admin for you, so you can focus on growing your team and business instead.
