Direct Bacs,
Internet Banking or Both?
Although internet banking
solutions have long offered speed and cost benefits, there are significant
advantages to using a direct Bacs system
What
is the best way to make supplier payments? For the growing numbers of
organisations, large and small, that are already using internet banking to
check balances and access statements, it is a logical extension to also use
the system to make payments. But how many organisations have considered the
costs in both transactions and finance director (FD) time? With internet
banking, payments are typically made individually and on the day by the FD.
Since
direct Bacs solutions enable organisations to make volume payments, schedule
forward payments and introduce multi-layer authorisation to reduce the onus
on the FD, it is time organisations considered the best way of achieving
strong financial control.
Financial Control
Whether
it is small and medium-sized enterprises (SMEs) subject to the challenging
payment terms imposed by their larger customers, or enterprises hoping to
maximise credit opportunities, good financial management is a fundamental
tenet of business success during a recession.
In
a bid to reduce bank charges and maximise payment flexibility, growing
numbers of organisations have actively embraced internet banking in recent
years. Providing immediate access to account balances, as well as the ability
to transfer funds between accounts and the opportunity to make immediate
payments, internet banking has obvious appeal - as does the apparent cost.
However,
while it is a good platform for ad hoc payments, many organisations are
discovering that using internet banking exclusively is extremely
time-consuming. Payments cannot always be scheduled in advance or grouped
into batches (volume payments) nor can payments be made without being logged
into the system. Plus an internet banking facility cannot integrate with
incumbent payroll or accounting solutions, resulting in the unnecessary
re-keying of data.
And
since no organisation wishes to provide internet banking access to any but
the most senior financial staff, this approach to payment cannot be assigned
to any other member of the team. As a result, senior managers are tied to the
office and are managing each payment individually, consuming large amounts of
time. Indeed, FDs of even the largest organisations are spending time every
day posting submissions in the internet banking system. Is this really the
best use of these skilled, experienced and valuable individuals?
Efficient Financial Management
This
situation is a significantly retrograde step. For decades, organisations of
every size have allocated cheque preparation and signing responsibility to
key personnel - the role has not been limited simply to the FD. So why, in a
world of flexible financial management, Faster Payments and real-time access
to statements and balances, is technology apparently imposing these
extraordinary constraints? And why are so many FDs continuing to endure these
time-consuming processes without demanding an alternative?
In
fact, there is serious confusion about payment processes and technologies.
Internet banking has become so ubiquitous that many organisations now believe
it is the same as the direct Bacs payment mechanism. This is not in fact the
case. While internet banking solutions typically do link into Bacs to ensure
payments arrive, they lack the depth of functionality provided by a direct
Bacs system - functionality that enables organisations to impose some
much-needed control and automation.
Furthermore,
many organisations mistakenly believe that internet banking is cheaper. Since
internet banking charges vary between banks and are often significantly
different for each customer, it is not a simple process to compare payment
mechanisms. But organisations need to ascertain the cost per file and per
transaction to process payments through internet banking. Typically, any
organisation making more than 50 transactions per month will achieve
significant transaction processing savings by moving to a direct Bacs
solution.
Flexible Payments Mechanism
Organisations
can, however, attain significant benefits as a result of flexible payment processes
that release the FD from unnecessary, time-consuming activity. Using a direct
Bacs system, payments can be submitted up to 10.30pm and still make that
day’s processing cycle. This is a full seven hours later than many bank
solutions, allowing an organisation to truly maximise credit opportunities.
It also provides access to Faster Payments for submission of payment batches,
enabling organisations to avoid the high costs associated with CHAPS.
Organisations can also pull down reports from Bacs, review cash flow analysis
and assess submission reports, at the touch of a button.
Most
critical, however, is the ability to support both volume payments and
multiple payment scheduling, which allows organisations to forward-plan
payment batches to multiple banks and exploit any credit opportunities, but
without requiring the time-consuming, daily attention of an FD.
Furthermore,
a direct Bacs solution offers businesses the highest level of security, which
is critical when handling sensitive financial information. By facilitating
the encryption of data within the solution and from existing accounting
solutions, data is protected and managed in a secure location at all times
and source files from the network can be deleted.
Direct
Bacs also offers organisations secure, role-differentiated access assigned to
different employees at a company’s discretion. Furthermore, the option
for single, double, even triple signatory authorisation, combined with strong
workflow, gives organisations the opportunity to use less senior personnel to
prepare the payment process - releasing the FD for far more strategic
business responsibilities. This not only allows control over staff access to
the correct level of information, but in turn reduces the risk of sensitive
data falling into the wrong hands.
With
direct integration to the core accounting system, it is a simple process to
pull information directly into the Bacs system, eliminating the need for the
re-keying of data. The collection of data can be automated, as can the validation
of authorisation, creating a streamlined payment solution.The result is that
while organisations have to drive internet banking software, they can
actually use a direct Bacs solution to drive the payment schedule and impose
greater financial control.
Best of Both Worlds
So
what is the best approach to sound financial management - internet banking or
direct Bacs? In fact, organisations need both. Internet banking provides real
advantages in the low-cost visibility of account balances and the ability to
make last-minute, ad hoc payments. However, if organisations are to maximise
financial control, there is a clear need for an automated and proven
methodology for volume payments that can be scheduled in advance, minimising
the administrative overhead associated with financial management.
By leveraging a
combination of both internet banking and direct Bacs, organisations can
impose control without requiring time-consuming, daily intervention by the
FD. They can achieve full, real-time visibility of financial statements while
still maximising credit opportunities and improving security procedures. It
is by taking the best of both solutions that organisations can really
maximise financial control.
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