We’ve teamed up with chartered accountant, fintech consultant and Pathfinder Nick Levine to give you the Accountant's view on how the industry is adapting to Faster Payments.
That’s because it’s our mission to make more time for accountants, be it through our payments technology and partners, such as Sage, IRIS and BrightPay, or through our content. We produce blogs, guides, and tutorials, as well as the Pathfinders newsletter and private LinkedIn group, to make the lives of accountants easier.
Providing clients with payroll and payments services used to be a chore due to the limitations of the Bacs payment system.
While Bacs is universally recognised and is still the most common payment type for businesses, it is far from perfect. Bacs transactions are expensive to set up, inflexible and slow. They take three working days to clear, meaning that payment of invoices due must be set up in advance, and it’s challenging for businesses to have accurate visibility on their cash positions due to uncleared transactions.
Faster Payments tools, such as the Modulr Payments Dashboard, now offer accountants and their clients a compelling alternative, and one which has many benefits over Bacs.
What are Faster Payments?
The Faster Payments Service was introduced in 2008 as a speedier alternative to more common payment methods such as Bacs. Transactions of up to £1m can now be sent via the service. Currently, fewer than 50 payment systems participants are approved to run Faster Payments, of which Modulr is one.
Faster payments are:
As the name implies, Faster Payments clear significantly faster than Bacs. In most instances, Faster Payments transactions clear within just a few seconds, although occasionally can take up to a couple of hours.
Accountants and businesses who move away from Bacs to Faster Payments can be more agile when running payroll and payments due to not needing to execute and plan assignments three working days in advance.
They can even set up payments to transact on the exact day they fall due and make payments at short notice. This may be required due to their urgency or when they have accidentally been missed (i.e. a new starter employee being left off the payroll) when processing payment runs.
Bacs is also restrictive due to limitations around when transactions can be set up and executed. Frustratingly the Bacs system is only available on business working days. This can create issues if payment due dates are on weekends or bank holidays and requires accountants to be extra organised during the Christmas and New Yew period to ensure all staff and suppliers are paid on time.
However, Faster Payments can be sent 24/7, 365 days a year, meaning payments can even be made on Christmas Day!
3. Cheaper to setup
Setting up Bacs to make payments is expensive for most accounting firms and SMEs. They must either use a specific Bacs-approved software provider (costing around £2,500) or use a bureau (around £5,000).
Instead, Faster Payments enabled solutions, such as the Modulr Payments Dashboard, have significantly cheaper setup costs. This makes Faster Payments an affordable solution for accounting firms and SMEs who only make a handful of monthly transactions.
4. More suitable for the gig economy
The increasing tendency for workers to complete adhoc jobs on platforms (such as Uber, Deliveroo and Taskrabbit) means that the gig economy is here to stay. But, gig economy workers need to be paid frequently and promptly and are likely to rely on payments for jobs to cover their bills. And, businesses and platforms that pay these individuals via Bacs risk losing workers due to them not being paid fast enough.
Faster Payments allows for instant payment, minimising the chance of these workers leaving in favour of other businesses or platforms.
5. Less prone to error
Bacs payment runs normally require spreadsheet uploads and manual input, creating the risk of sending payments to the wrong beneficiary or at the incorrect value. Fixing these errors can be time-consuming and put a strain on relationships.
Faster Payments powered tools, including the Modulr Payments Dashboard, pull data automatically from accounting software, reducing the element of manual error. Additionally, bank details are checked at setup, with anomalies automatically highlighted.
6. Close to real-time financial data
The instant nature of Faster Payments means that payments are reflected instantly, so accountants and businesses have a real-time view of their finances. This makes it easy to maintain accurate forward-looking cash flow forecasts without needing to post journals related to cash in transit for uncleared Bacs payments.
And, accountants can more easily offer related advisory services on issues such as working capital and access to finance.
Faster Payments are cheap, easy to use and instant
The benefits of Faster Payments over Bacs are so compelling that accountants should consider switching if they haven’t already. Faster Payments also create an attractive entry point for firms who do not already run payroll and payments for clients.
The Modulr payments dashboard: How it works
To learn more, or to request a demo, please contact us.