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Direct deposit overview
About direct deposit
You can use the application's direct deposit features to create domestic and international ACH files.
If you're new to direct deposit, you can learn more from the terms and definitions at the end of this topic.
Accounting CS Client Access
If you process direct deposit files for a client that uses Accounting CS Client Access:
- Your client can define their own direct deposit settings for a bank by going toSetup,Bank Accounts, then theClient Direct Deposittab.
- Your firm enters direct deposit information by going toSetup,Firm Information,Impound Bank Accounts, then theDirect Deposittab. Your clients can't view or change this information.
International ACH information
All international transactions made via the ACH Network are required to use the International ACH Transactions (IAT) SEC code. This rule applies to all ACH participants and simplifies the process of identifying international transactions by requiring that IAT entries include specific data elements defined by "Travel Rule" in the Bank Secrecy Act (BSA).
important
In all situations, the application assumes transactions originate at a bank within the territorial jurisdiction of the United States. All IAT transactions are considered outbound items, and the destination country must be a country that accepts US Dollars. The application supports international ACH transactions to Canada, Mexico, and the United States.
Workflow
- Set up a direct deposit bank account.
- Set up direct deposit information
- For employees (live payroll processing only).
- For vendors or agents.
- Prenote direct deposit files.
- Process direct deposits.
- Enter and print payroll, vendor, or agent checks.
- Create ACH files.
The Automated Clearing House (ACH)
The Automated Clearing House (ACH) network is a nationwide system for interbank transfers of electronic funds. It serves a network of regional Federal Reserve Banks that process the distribution and settlement of electronic credits and debits among financial institutions. ACH payments include:
- Direct deposit of payroll.
- Business-to-business payments.
- Federal, state, and local tax payments.
- Other types of electronic funds transfers.
ACH files
A simple ASCII-format file that adheres to Automated Clearing House specifications. A single ACH file holds multiple electronic transactions. Think of it like a manila file folder used to store and transmit sheets of paper with information on a single topic. Each transaction within an ACH file carries either a credit or a debit value. Typically, a payroll ACH file contains credit transactions to employees’ checking or savings accounts, and a balancing debit transaction to the employer’s (that is, your client’s) payroll account.
Destination
The Destination bank is the immediate destination. This bank will receive the ACH file.
Effective date
An “effective date” is attached to each and every ACH transaction. For payroll transactions, effective date represents the day when both:
- debit amounts would actually be withdrawn from the employer’s payroll account, and
- credit amounts deposited to an employee’s bank account.
An effective date cannot fall on a weekend, Federal Reserve holiday, or on a date that has already passed (a “stale date”). If it does, the transaction will be automatically tagged to settle on the next business day.
As payroll processor, your firm will need to monitor effective dates because they affect the date when you must transmit your ACH files.
Electronic Payment System (EPS) files
EPS (electronic payment system) files are commonly referred to as “transaction files” or “ACH transactions.” They store, for example, employees’ net pay amounts and financial account information. Typically, multiple EPS files make up what is the more well known direct-deposit file, the ACH file.
Kotapay
Kotapay is a third-party processing agent that processes funds electronically via the Automated Clearing House.
National Automated Clearing House Association (NACHA)
The National Automated Clearing House Association (NACHA) oversees the ACH network and is primarily responsible for establishing and maintaining operating rules for the network.
All financial institutions moving electronic funds through the ACH system are bound by the NACHA Operating Rules, which cover everything from participant relationships and responsibilities to implementation, compliance, and liabilities.
Originator
An ACH Originator is typically a company that directs a transfer of funds to or from a consumer account. The Originator bank is the bank where the ACH file is originated.
Originating Depository Financial Institution (ODFI)
The financial institution that deposits ACH files, on behalf of the Originator, into the ACH network.
Prenote (or prenotification) files
Prenote files are zero-dollar entries sent prior to the first live entry to notify the Receiving Depository Financial Institution (RDFI) of future payments and to test the validity of account information.
Processing window
Refers to the time period required to initiate and complete the instructions included within an ACH file. The processing window begins when ACH files are submitted to ODFIs and ends when transferred funds are posted to the receivers’ accounts.
note
The following gives an example of the processing window:
Receiver
The Receiver is the person or organization that has authorized the Originator to initiate an ACH entry (for example, a direct deposit transaction) to the Receiver’s account with an RDFI.
Receiving Depository Financial Institution (RDFI)
The financial institution that receives ACH entries from the ACH Operator and posts the entries to the Receiver’s accounts.
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