Batch Payment Processing - A Guide for UK Businesses

In the fast-paced world of business, being efficient holds high value. This is especially true for batch payment processing.

UK businesses, whether paying providers, contractors, or employees, often face challenges in their daily operations. These can include managing a large number of transactions, dealing with different types of money, and making sure they process payments on time.

Batch payment processing is a solution that makes these tasks easier. For businesses that trade internationally, and for example need to pay Chinese suppliers, batch payment processing can be helpful.

We'll also explain how it works for a regular UK business. Let's get started!

How does payment processing work?

Payment processing is a crucial business operation that allows you to receive and send payments for your business's transactions.

For most businesses, it is a complex system that involves several parties, including the business (merchant), the customer or supplier, banks, and payment processors.

Here's a simplified example of payment processing workflow for an average UK business:

• Starting a Transaction:
  The customer makes a purchase and gives their payment information to the business. This can happen in person with a credit card or online via a digital payment platform.

• Using a Payment Gateway:
  The payment information is securely sent to a payment gateway, a service that forwards the transaction data to the right payment processor.

• Payment Processor:
  The payment processor talks to the customer's bank (the issuing bank) to check for the correct amount of money or credit to complete the transaction.

• Getting Authorization:
  The issuing bank approves the transaction with the correct funds. This approval is sent back to the business through the payment processor and payment gateway.

• Moving Funds:
  At the end of the day, all approved transactions are sent together as a batch from the merchant to their bank (the acquiring bank). The acquiring bank then works with the issuing banks to move the money for each transaction from the customers' accounts to the merchant's account.

• Confirmation and Receipt:
  The transaction is finished once the money has been transferred. The business can provide a receipt to the customer to confirm that the transaction was successful.

What is batch payment processing?

Batch payment processing is a method where multiple payments to different vendors are grouped together and processed from the same bank account. This can be done manually or in an automated manner.

There are multiple practical examples. For instance, Subscription-based businesses¹ (such as streaming services and SaaS providers) frequently bill their clients on a recurring basis. Thanks to batch processing, they may collect money from all subscribers at once.

Online marketplaces that link vendors and buyers often rely on batch payment processing to distribute cash to several sellers at once. For example, a platform can send payments to all merchants for transactions completed during a specified time period.

If you're a business owner using Wise Business to pay your Alibaba suppliers, you could use batch payment processing to pay all your suppliers simultaneously instead of making individual payments to each one. This saves time and simplifies the payment reconciliation process on your bank statement.

Here's how batch payment processing works in an automated system:

• Invoices are approved and payments are created for these invoices.
• The payments are then authorised for release by the controller, CFO, or CEO.
• An Accounts Payable (AP) automation platform performs batch payment processing to consolidate payments.
• The AP automation platform then facilitates payments to vendors.

It's important to note that manual batch payment processing can be more time-consuming and prone to human error. Many companies do a weekly payment run, where they must approve the invoices, get the payments in front of the CFO or CEO to be released, and execute checks. Different payment types require new workflows and steps. Therefore, automating this process can lead to significant time and cost savings.

Manual vs. Automated batch payments

Now that we've explored what is batch payments, it's important to understand that they can be processed in two distinct ways: manually or automatically.

Let's delve into the differences between these two approaches:

Manual Batch Payment Processing:

• How it works:
  Invoices are approved and payments are created for these invoices. The payments are then authorised for release by the controller, CFO, or CEO. Checks are then executed.

• Pros:
  Manual processing gives you complete control over every process step.

• Cons:
  It can be time-consuming, especially for businesses with many transactions. It's also prone to human error, which can lead to mistakes in payment amounts or recipients.

Automated Batch Payment Processing:

• How it works:
  An Accounts Payable (AP) automation platform performs batch payment processing to consolidate payments. The AP automation platform then facilitates vendor payments.

• Pros:
  Automated processing saves time and reduces the risk of human error. It also simplifies the payment reconciliation process on your bank statement.

• Cons:
  There may be a learning curve when implementing an automated system, and costs could be associated with purchasing and maintaining the software.

Wise Business batch payment tool

Wise's batch payment tool is a faster, cheaper, and safer way for businesses to make multiple international payments. It allows you to create and send multiple payments by simply uploading a file. This tool is perfect for businesses that need to make many payouts to their freelancers, employees, contractors or suppliers worldwide.

The main benefit of using the batch payment tool is creating up to 1,000 transfers with a single CSV or XLSX file rather than setting up one transfer at a time.

Here are the steps a business needs to run to process a batch of payments within the Wise Business multi-currency account:

1. Check all the requirements and set up your Wise Business account.

2. Once your account is verified, you can use Batch Payments.

3. Click “Send Money” on the top left and select Batch Payments.

4. Choose and download a batch payment template file.

5. Open the template file in a spreadsheet editor like Excel and fill in your recipients' transfer details, including name, transfer amount, and currency you want them to receive.

6. Save your file as a CSV or XLSX and upload the file on the Batch Payments page.

7. Review the transfers in your batch.

8. Pay for your batch.

9. Track your transfers in real time from your account page.

If there are any errors during the process, they should be resolved before proceeding with the batch payment. The system will notify you of errors during review, allowing you to correct them before finalising the payment. This ensures that all payments are processed correctly and efficiently.

Get started with Wise Business 🚀

In conclusion, batch payment processing is an essential tool for UK-based companies looking to optimise their financial processes. In the fast-paced business world, efficiency is critical, and batch payment processing provides a solution to various problems. It streamlines the difficult payment transaction procedure, especially for individuals involved in international trade.

This article has discussed the basic concepts of payment processing, describing how transactions go from customers to merchants via numerous intermediaries.

Batch payment processing, whether manual or automatic, consolidates several payments into a single transaction, increasing efficiency. When compared to manual processing, automated batch payment processing saves time and has lower mistake rates.

Notably, the Wise batch payment tool provides a simple alternative for firms doing overseas transactions. It allows for the rapid production and transmission of many payments using a single file upload, speeding the payment process and improving accuracy.

Sources used in the article:

1. Subscription business modell

Sources last checked September 15, 2023