Bacs payments are a type of bank-to-bank transfer used in the United Kingdom for direct debits and direct credits. These transactions are managed by Bacs Payment Schemes Limited and processed through the Bacs system, typically within three business days. This payment type is reliable and cost-effective, and it’s especially useful for businesses that handle regular payments. Bacs payments are widely used for recurring transactions and bulk payments such as utility bills and salaries. In 2023, Bacs recorded nearly 6.8 billion direct credit and direct debit transactions in the UK.

Below, we’ll explain what happens to Bacs payments that are made on Fridays and suggest tactics businesses can use to avoid potential disruptions caused by weekend processing delays.

What’s in this article?

• If you send a Bacs payment on Friday, when will it clear?
  
• Why do Bacs payments take longer over the weekend?
  
• How do Friday Bacs payments affect businesses and employees?
  
• How to handle failed Bacs payments initiated on Fridays
  
• How to schedule Bacs payments to avoid Friday delays
  
• What are the alternatives to Bacs payments on Fridays?
  

If you send a Bacs payment on Friday, when will it clear?

Bacs payments operate on a three-workday cycle:

• Day 1 (submission): A payment is initiated and entered into the system.

• Day 2 (processing): The payment is processed.

• Day 3 (settlement): The funds are settled and credited to the recipient’s account.

If you send a Bacs payment on a Friday before bank cutoff times, it will typically clear by the following Tuesday. Any payment made later will likely clear on Wednesday.

Why do Bacs payments take longer over the weekend?

Bacs payments take longer over the weekend because the Bacs system only processes transactions on workdays (Monday through Friday, excluding public holidays).

• If a Bacs payment is initiated early in the day on Friday, it will be processed on Monday and settled to the recipient’s account on Tuesday.

• If a Bacs payment is initiated after bank cut-off times on a Friday, it will be submitted on Monday, processed on Tuesday, and settled to the recipient’s account on Wednesday.

Because the Bacs system doesn’t operate on weekend days, Bacs payments initiated on a Friday can experience delays that extend the usual three-day process to four or five calendar days.

How do Friday Bacs payments affect businesses and employees?

The delay of Friday Bacs payments can cause the following for senders and recipients:

• Cash flow disruptions: Friday Bacs payments can disrupt a business’s normal cash flow cycle. This can make it challenging to manage operating expenses, especially for small businesses with tighter cash management requirements. These companies might need to adjust their financial strategies or arrange for short-term financing solutions to cover expenses until funds are available.

• Payroll delays: If a Bacs payment is made on a Friday, it might mean employees don’t receive their salaries until the following Wednesday. This can cause additional problems if employees have already scheduled automatic debits or financial obligations around their expected payday. Delayed payments can lead to financial stress, overdrafts, reduced trust, and lower morale.

• Late supplier payments: Friday Bacs payments can cause late payments to suppliers. Those can strain relationships and result in late fees or disrupted service, particularly if suppliers rely on timely payments for their cash flows.

• Accounting challenges: Friday Bacs payments can complicate financial reporting and accounting practices. Forecasting cash flow accurately becomes more challenging if payments are delayed, affecting budgeting and financial decision-making. Accounting teams must understand and account for these delays to avoid reconciling accounts at the wrong time.

• Legal penalties: In the UK, employers must pay wages on the agreed-upon date per the Employment Rights Act 1996. If Friday Bacs payments delay payroll, businesses might be subject to financial penalties for noncompliance and to reputational damage.

How to handle failed Bacs payments initiated on Fridays

If a Bacs payment initiated on a Friday fails, the business will experience even further delays. Here’s how to handle failed Bacs payments:

• Check for errors: Most Bacs systems will notify you if a transaction didn’t go through. Look for notifications or reports that explain why the payment failed. The problem could be caused by incorrect bank or payment details, insufficient funds, or a technical glitch.

  • If the issue was a lack of funds, ensure the account has enough money before you retry the payment.
    
  • If there was a mistake with the payment details (e.g., account numbers, sort codes), correct it in your system.
    
  • If the issue lies with the bank, contact them to understand what happened and when it will be fixed.
    

• Inform the finance team: Contact your finance team as soon as possible so they can figure out how this affects cash flow and any other scheduled payments.

• Communicate with affected parties: If the failure affects salaries or payments to suppliers, notify those who are impacted.

• Resend the payment: If it’s an important payment, consider using an alternative payment method that will be processed more quickly. If you decide to stick with Bacs, schedule the payment again, avoiding weekends and bank holidays to prevent further delays.

While these methods help control damage immediately after a failed payment, consider incorporating the following best practices:

• Check your payment process regularly to catch any recurring issues. This might involve automating certain parts of the process or adding more checks before submissions.

• Ensure that every team member involved in payment processing knows what to look for and how to avoid common mistakes.

• Keep backup payment methods such as Faster Payments ready in case you need to send money quickly after a failed payment.

• Plan for payment failures so everyone on your team knows what to do.

How to schedule Bacs payments to avoid Friday delays

To avoid the delays of Friday Bacs payments, plan ahead for alternate payment timelines. Use the following best practices:

• Don’t send Bacs payments on Fridays. Because Bacs payments take three working days to process, Friday payments might not clear until the following Wednesday.

• Scheduled payments to go out on Monday, Tuesday, or Wednesday to avoid the weekend delay.

• Check the calendar for any upcoming bank holidays, which can extend the processing time even more, and avoid scheduling payments on those days.

• Consider automating your payment schedule to implement recurring payments in advance.

What are the alternatives to Bacs payments on Fridays?

If you want to avoid the potential delays of Friday Bacs payments, there are several alternative payment methods you can consider, each with its own benefits and costs. The right choice for you will depend on specific factors, such as the urgency of the payment and the amount involved. Here’s a closer look:

• Faster Payments System (FPS): FPS is a UK-based service that facilitates almost instant transfers between bank accounts, typically within hours or even minutes. Unlike Bacs, FPS operates 24/7, including weekends and bank holidays. This makes it ideal for urgent or last-minute payments. It can have slightly higher transaction fees for businesses compared to Bacs.

• Clearing House Automated Payment System (CHAPS): CHAPS is another UK payment method that guarantees same-day transfers, as long as instructions are sent before the cut-off time (usually around 4 p.m. on a workday). It’s especially useful for large, time-sensitive transactions, although it does come with higher transaction fees compared to Bacs.

• Automated Clearing House (ACH): ACH payments are common in the United States. Some UK banks can accept international ACH transfers from US bank accounts. This can be convenient for international businesses but might incur currency conversion fees.