Commercial Cash Management Services are an important component of your business' overall financial plan. Through electronic services such as Collection and Concentration, Information Reporting, Disbursement, Overnight Investment, and Loan Sweep, you can effectively manage the cash position of your business and improve the productivity of your employees.
One Commercial Cash Management Service in particular helps both the company and its employees meet their cash management goals. Payroll Direct Deposit, through the Automated Clearing House (ACH), has proven to be a safe, reliable, and affordable method of payroll disbursement. Millions of employees, from large and small businesses and organizations, enjoy the convenience of receiving their pay into the account of their choice, electronically.
Your company will enjoy the obvious benefits of Direct Deposit, such as reconciling a single debit for payroll, instead of pages of checks; however, there may be hidden benefits as well. A local contractor cut expenses by eliminating the truck delivery of payroll checks to the workers on the construction sites. The workers now use their break to eat lunch, instead of waiting in line at the bank to cash their checks. Another marketing firm pays national sales people by depositing in their banks across the country. Direct Deposit can also be used for travel and expense reimbursements, and pension payments.
Direct Deposit's cash management efficiency does not end with the company. Employees are thrilled to access their cash through ATMs, the morning of payday. Direct Deposit, in concert with Internet banking, electronic bill payment plans, and accounts that automatically sweep funds for investment, creates the ultimate personal cash management strategy.
It's easy for your company to implement a Direct Deposit program. Once you contract with your Originating Depository Financial Institution (ODFI) and your employees enroll in the program, three basic steps are necessary:
Don't be intimidated by the term "NACHA format". The formatting utility may already be present in your current payroll or accounting software. If not, you might want to upgrade your software, or take advantage of user-friendly ACH software offered by your financial institution. If you prefer, you may contract with a payroll service provider who will prepare the file for you based on data that you phone, fax, or transmit to them. Some adventurous law firms even use two methods of file creation: the staff payroll is sent to a service provider, while the payments to the firm's partners are prepared and transmitted through software provided by the bank.
Make sure to contact your bank's Cash Management Specialist who will coordinate the set up of Direct Deposit and obtain a secure ID from the bank for your company's transmissions. Your ODFI can receive a PC-to-mainframe, or mainframe-to-mainframe transmission of your NACHA formatted payroll file. If you create the file in-house and transmit directly to the bank, plan on a test transmission, approximately one month before any dollar transactions are processed.
Timing is a crucial consideration when implementing Direct Deposit. Routine processing of the file would involve delivery of the transmission to the bank no later than the bank's cutoff time, two banking days before the dollars are credited to employees. For example, transmit the file to the bank by 3:00 PM on Wednesday and employees can access the funds Friday morning. In your planning, allow an additional lead day when a Federal Reserve holiday occurs in the Direct Deposit cycle.
Direct Deposit introduces you to the world of ACH, but don't stop there! Explore electronic disbursements and collections, as well as other Commercial Cash Management Services, by contacting your bank's Cash Management Specialist.
Updated: January 1, 2013
This article is for informational purposes only and is not intended as an offer or solicitation for the sale of any financial product or service or as a determination that any investment strategy is suitable for a specific investor. Investors should seek financial advice regarding the suitability of any investment strategy based on their objectives, financial situations, and particular needs. This article is not designed or intended to provide financial, tax, legal, accounting, or other professional advice since such advice always requires consideration of individual circumstances. If professional advice is needed, the services of a professional advisor should be sought.
© 2013 Wilmington Trust Corporation.