Streamline your payroll process with ACH credit to reduce transaction fees, improve cash flow, and eliminate the risk of lost or stolen checks. ACH credit payments can be used for direct deposits, paying recurring bills, or sending one-time payments to employees.
Employees who receive direct deposit can access their earnings within hours of the scheduled payday. It reduces stress on your team and keeps them from rushing to the bank to get their money before it’s too late.
Automated Payroll Payments
Using an ACH payment processing system for payroll eliminates the need to distribute paper checks, which can be lost or stolen. Instead, money is electronically transferred from your business bank account to employee personal accounts for direct deposit. ACH transactions are much faster than distributing paper checks and more secure, as they don’t have to be physically distributed.
ACH payments are also an excellent option for recurring payments, like monthly subscription fees. Your customers can set up their payments on the same day each month, making it easier for them to remember and helping your business improve cash flow by having a more predictable revenue stream.
To complete an ACH debit, your customer must furnish their bank account information and approve the transaction. Then, their bank will verify that the information is correct and that they have enough funds to cover the transaction before allowing it to occur.
Depending on the type of transaction, an ACH debit can cost less than a credit card payment, as ACH transactions typically only incur a few pennies in fee per transfer. Credit card transactions can quickly add up for businesses that handle large payments due to a charge of 1.5% to 3.5% per transaction. It can result in significant costs that may impact the overall profitability of the business. Additionally, fewer payments will fail with ACH debits, as a bank will only accept an appropriately authorized transaction.
Easy Employee Self-Service
Regarding ensuring the safety and security of financial transactions, ACH credit payroll transactions are superior to paper checks, which are prone to being lost or stolen. Using the ACH network, your business can quickly convert checks to electronic payments for employees and vendors. It reduces the amount of time that is required to cut and distribute payments. It also offers a more cost-effective, efficient way to pay employees and vendors than traditional checks.
Your business can deposit payroll directly into employee accounts on an accelerated schedule using ACH debit. On preset days, the employer’s bank sends direct deposit instructions to the ACH, which then processes and credits the employee’s banks with the specified sums. At the same time, an equal amount is debited from the employer’s business account.
Many small businesses have implemented ACH for their payroll to speed up the paycheck delivery process and eliminate the need to mail checks. The ACH system allows them to send funds to multiple banks simultaneously more efficiently and accurately than traditional checks.
To implement ACH direct deposit, employers must collect some information from their employees. It is typically handled by the payroll services provider, who can provide forms or a self-service portal for employees to fill out. Employees will need their bank names, account types, and numbers, along with the routing number for their banks.
Automated Expense Reimbursements
ACH transactions aren’t just for paying employees. They can also be used to automate expense reimbursements for customers and clients. You may have already experienced this as a consumer, such as signing up for autopay with your phone company to make monthly bill payments. With this payment method, the amount owed is automatically pulled each billing cycle from your checking account by the ACH network. It gives you a smoother cash flow and takes the burden of writing checks off your accounting team.
Likewise, small business owners can reduce paperwork by implementing ACH direct deposit for payroll and other invoices. The process is typically easier than collecting paper checks and provides employees with secure access to their earned wages. Plus, the fees associated with ACH are much lower than processing credit cards.
To complete an ACH credit transaction, the Originating Depository Financial Institution (ODFI) sends a request to the Receiving Depository Financial Institution (RDFI) with the correct information for the intended recipient. The RDFI then posts the ACH entry into your employee’s account or pay card. This process can take up to a few business days to clear and settle.
If you’re interested in using ACH to streamline your business processes, contact Kotapay today. We can help you integrate ACH payments into your existing accounting software and implement direct deposit and other forms of automated payment collection. From accounts payable to 1099 payments, we have solutions designed for any size business.
Using paper documents for payroll can cause many errors, which can be costly to your company and frustrating for employees. ACH payments are more accurate and secure than paper checks, leaving electronic records that are easier to access and review.
ACH payments are less expensive than using paper checks or credit card transactions. Depending on the type of transaction, fees may be charged by the ACH network or your processing partner (such as Plaid Balance). But even with these costs, ACH payments are still significantly cheaper than paying for the same services with paper checks.
Every ACH transaction begins with data files, including an employee’s name, bank account and routing number, and the amount of their paycheck after deductions. The Originating Depository Financial Institution or ODFI will package and send these ACH files to the ACH clearinghouse. Once there, the clearinghouse will sort and batch-process the ACH files received that day. Eventually, the ACH credits will arrive at your employee’s bank, which will deposit the funds into their accounts.
Whether running a small business, non-profit organization, association, or large corporation, ACH credit and debit transactions are the more brilliant choice. They streamline your accounting processes, save you time and money and offer a better experience for both customers and suppliers.