Operating an SME in the UK is no easy challenge. Not only do you need to control in-house costs and the quality of production, but there are so many government regulations you must adhere to that the typical owner or director is simply overwhelmed. Paying creditors and collecting from debtors can take a toll on any business, but an SME is usually at a disadvantage unless there is an entire accounting department to handle all financial affairs.
A Bit of Bacs Background
Few SMEs have the financial wherewithal to hire a full-time accounting staff, and so they are at a disadvantage from the very start. With the Bacs system, direct debits and credits should make it easier to streamline processes, but for several reasons, your SME may not be qualified to register with Bacs. If you are seeking ways to streamline payments and debits for your company, here is some of what you should know about qualifying for Bacs. Those companies which don’t qualify for the Bacs payments scheme can always use the services of a Bacs Approved Bureau (BAB), and a growing number of these are using bacs approved software from AccessPay. Whether you are eligible, or in need of a BAB, this is the software to become familiar with for streamlined automated payments.
Direct Access to Bacs Requires a SUN
Here is the first, and perhaps biggest, obstacle many SMEs in the UK face. In order to access the Bacs (Bankers’ Automated Clearing Scheme), you must apply for a SUN (Service User Number), sometimes referred to as an Originator ID. This is a six-digit number that identifies you with the Bacs system so that every time a debit or credit is processed, your account is immediately noted with the transaction. However, qualifying for a SUN is not as easy as it sounds, as you must meet certain criteria.
Basic Criteria for Obtaining a SUN
In order to be issued a SUN, you must be sponsored by a Bacs member which, in this case, would be one of the participating UK member banks. These are the major banks throughout the UK. In order to qualify for a SUN, you must meet at least three main requirements, which include:
- Superior management skills – the ability to demonstrate that you can follow and enforce the Direct Debit scheme regulations with a minimal number of errors. The ultimate goal is to preserve the integrity and reputation of Bacs.
- Sufficient funds in reserve – your organisation must have sufficient funds held in an account to cover any refunds which you may be required to issue. This falls under the rules of the Direct Debit scheme with the intent of protecting customers from payments processed which were in error or fraudulent debits.
- Capacity to honour a contractual agreement with your bank – proportionate to the previous requirement, you must show that you have on account sufficient funds to indemnify/protect your sponsoring bank against any of those erroneous or fraudulent debits, as per the Direct Debit Guarantee.
However, there are other requirements such as the amount of revenue your company realizes annually, as well as the length of time you have been in business. If you have not been doing business in the UK for at least three successive years and are not making the minimum revenue annually, you will most likely be denied Bacs access and will need to contract with a Bacs Approved Bureau.
Each Bureau Has Its Own Requirements
The one thing you may wish to consider when looking for a Bacs Approved Bureau would be that each has varying levels of eligibility. They must meet stringent legal requirements and so that particular BAB will want to be assured that the SMEs they contract are able to honour financial arrangements. It is good to keep in mind that the level of service you receive from a BAB is also an important consideration.
There is much to learn and understand when it comes to streamlining your accounting with a Bacs Direct Debit and Direct Credit scheme, but the simplicity of software like that from AccessPay can help streamline the learning curve. If you are looking for a BAB to accept and make payments on your behalf, it would be wise to check out which software platform they are using and how it can integrate with your ERP. You may not be eligible for a SUN, but you certainly can take part in the scheme with a registered BAB, so choose wisely.