Payroll Practice: Six Reasons You Should Use Faster Payments Instead Of BACS

Think it’s a given that Payroll Payments are expensive and slow? We’ve got news. At last, Accountants and those performing in house payroll, have a better solution to expensive and slow BACS payments. 

BACS is now a legacy system

Operating payments and payroll services for clients was once a hassle because of the many limitations that came with using the BACS system of payment. Although BACS is still recognised universally and remains the most commonly-used payment type among businesses, there's a new payment type making practice easier for business who want to free up cashflow, and securely cut time out of the payroll process.

A BACS payment takes at least 3 business days to finally clear, and that means payroll and invoice payments must be planned ahead and set up well in advance. Businesses also find it very challenging to have clear visibility with regard to their cash position while transactions remain uncleared.

Faster Payments - What Are They?

With UK business demanding better cashflow and more control - 2008 saw the introduction of the Faster Payments Service, a faster alternative to long-standing BACS. Transactions worth as much as £1 million are now able to be sent using this service. 

Faster Payments is a system that can only be use by registered participants – like Caxton Payments, a pioneer of payments fintech. Faster Payments tools like Caxton Payroll Payments offer a compelling alternative to what is now the ‘old’ BACS system. Let’s see why.

We take a look at six reasons why you should be using Faster Payments for Payroll: 

1. They're faster

   A Faster Payments transaction will usually clear in just a handful of seconds.
   Businesses and accountants who make the decision to switch to Faster Payments can react quicker to changes, and run more agile payments and payroll as they no longer need to set them up three days before they need to clear.
   
   It’s even possible to set up transactions on the very day that they’re due to be made, allowing payments to be made at very short notice. This allows response to urgent payments, and it helps resolve a common scenario of accidentally missing an employee from payroll (perhaps because they have only just started working for the company).

2. They're more flexible

   In many industries - employees don’t stop for weekends and holidays – and neither should payroll. BACS can only be accessed on standard business days – requires a three-day set up. This creates significant problems when the due dates for payments fall on bank holidays or weekends. Accountants must also be organised well in advance during the festive holiday period in order to make sure that all suppliers and staff receive their payments on time. 
   
   In comparison, Faster Payments are able to be sent at any time, any day of the year, so you can even set payroll on major public holidays like Christmas Day! 

3. They're less expensive to set up

   Offering payroll to clients was once cost prohibitive until a business or practice could reach a certain scale. Required to use either a specific software provider that is approved by BACS or operate via a bureau, each adding thousands in overhead costs for your service.
   
   Faster Payments offers a better option with enabled solutions like Caxton Payroll Payments coming with much lower set up costs. As a result, Faster Payments represents the most affordable option for SMEs and accountancy firms who make only a few monthly transactions.

4. They're less likely to suffer from errors

   A BACS payment run requires manual input and uploads of spreadsheets, which opens up the possibility of a payment being sent to the incorrect beneficiary, or the payment being in the wrong amount. If you’ve experienced an error in a BACS spreadsheet, you know rectifying it can not only be time consuming but event potentially strain relations with a client!
   
   Caxton Payroll Payments powered by Faster Payments will automatically pull data from the accountancy software, thus reducing the possibility of manual errors. Also, checking of bank details is carried out at the setup stage, so anomalies will be highlighted automatically.

5. Timely, accurate financial data

   As Faster Payments are, by their nature, instant, transactions will be reflected as soon as they’re made, allowing a view of finances in real-time. This has positive knock on effect  for easily keeping forecasts for forward-looking cash flows accurate without posting journals relating to cash that is in transit to account for BACS payments that have not yet cleared. 
   
   Further reporting benefits give financial accountants a clearer view for advising on critical business issues like finance access and working capital.

6. They're better choice for casual and gig economy workers

   Whether it’s a main source of employment or a bit on the side – the gig economy is going nowhere. Workers in the gig economy must be paid promptly and frequently, and they need to be paid for their jobs in order to pay their own bills.
   
   Platforms and businesses that make payment to gig economy workers using the BACS system risk losing their workforce due to a failure to receive their money fast enough. With Faster Payments, payment is virtually instant, and that minimises the risks of workers choosing to leave for other platforms or businesses.
   
   This doesn’t just apply to the giants like Uber and Deliveroo – hospitality, retail and tourism businesses competing for casual staff could now offer almost instant pay for employees with irregular salary as a key benefit – without increasing costs.
   
   There are so many benefits that come with choosing Faster Payments for Payroll, it’s clear accountants and business should think carefully about making the switch. If you work with clients who make payments but haven't yet offered payroll – this could be a game changing entry point. 

Caxton Payments

Caxton Payments is an alternative to traditional banks, established over 20 years, we help businesses make faster payments more reliably. We offer streamlined processes, automation through API and a collaborative solution to complex payment issues all from a single platform. Our payment capability extends from business expense management, to payroll payments, supplier payments, and currency risk management. We also offer personal prepaid travel cards and international money transfer.