What are BACS payments?
BACS payments are electronic funds transfers directly from one bank account to another. They save companies in the UK a great deal of time, money and aggravation. They are also better for the environment.
When a business issues a sales invoice to a customer, the customer at some point has to pay the amount owed and if he/she does this using a cheque then there are a number of unnecessary costs involved.
- -Time costs in writing the cheque
- -Postage costs in posting the cheque – including time taken going to the post
- -Envelope costs
- -Additional bank charges for processing a cheque payment
- -Additional bookkeeping costs in terms of the time taken to reconcile cheques with bank statements
For the supplier there are also additional costs
- Time costs associated with writing out paying in slips
- Time and postage costs associated with posting the cheque to the bank
- Additional bookkeeping reconciliation costs
There are also natural resources that get wasted in the form of paper and, of course, mileage/fuel costs that are met by the Royal Mail out of your postage costs. Banks too incur increased processing costs for cheques which is why they levy much higher transaction charges for cheque payments and receipts than they do for electronic payments and receipts.
So the conclusion is that you really ought to move away from cheque payments if you possibly can because it will save you a lot of money.
It’s worth estimating the cost to your business over a full year.
For example, one bank in the UK charges £0.74 for each cheque paid in and £0.68 for each cheque written. In contrast an internet-based BACS payment costs £0.21 and an internet-based BACS receipt costs £0.18.
So if you write out 200 cheques a year you are wasting (£0.74-£0.21)*200 = £106 on your payments alone. Then add in 200 stamps @27p = £54 plus 200 envelopes at 7p = £14 which totals £174.
And then there’s the time wasted, the paper wasted and the additional costs you push on to your supplier too. In fact if you receive 200 cheques in payment too, your business will be incurring well over £100 in additional and unecessary banks charges too as well as additional postage costs and banking time.
Conclusion: if you haven’t already moved over to BACS payments, now is the time to do so!