Feb 14, 2011

Direct Deposit—It’s Money in the Bank

[caption id="attachment_393" align="alignright" width="300" caption="Direct deposit"]

[/caption] It’s 6 a.m., payday. Jane stumbles out her door in a severely Febrezed pantsuit and climbs into her car. The gas-gauge needle is touching the top of the E and she hopes she can make it to the service station a quarter-mile away. You see, Jane’s mortgage payment was due and her washing machine broke and her car tires needed replacing and her kids needed ballet shoes, all within three days of the last payday. Life’s financial whammies left Jane eating crackers and jam, scratching through to the next check. But you just made her morning better. You offer direct deposit, and Jane is your employee. She can coast confidently into the service station at 6:05 a.m., fill up on gas to get to work, grab a coffee and perhaps a doughnut, and pay for it all with her debit card. Her pay is already in her account. Offering direct deposit is good for employees like Jane, and it’s good for you. What is direct deposit? Direct deposit is when you, the employer, deposit your employees’ pay directly into their bank accounts instead of giving them paper checks. Direct deposit of payroll is one form of electronic funds transfer available through the Automated Clearinghouse Network. The ACH Network also handles B2B payments, e-checks, and more. The first ACH payments happened shortly after the 1974 formation of the National Automated Clearinghouse Association, now known as NACHA—The Electronic Payments Association. NACHA members created the guidelines for ACH payments. The Payments Authority, a regional organization under the national NACHA umbrella, illustrates on its website how ACH payments are processed. According to the website, the receiver (the employee) gives the originator (the employer) permission to deposit a payment into the receiver’s bank account. The originator then makes arrangements with his financial institution (ODFI). The originator’s financial institution then gets in touch with the ACH operator. The ACH operator gets in touch with the receiver’s financial institution (RDFI). Then, the RDFI makes the funds available to the receiver. Imagine that process occurring at cyberspeed. Why offer direct deposit? The question isn’t, “Why should you offer direct deposit?” The question is, “Why wouldn’t you offer direct deposit?” The benefits of offering direct deposit in lieu of checks are clear: It’s faster, safer, and more convenient. Plus, it’s green. • Faster. Direct deposit funds are available more quickly, compared with funds from paper checks. Employees can count on having money in their bank accounts the morning of payday—not the afternoon of payday, or three days after they deposit their checks into their accounts. • Safer. According to the NACHA website, “Almost 85 percent of identity theft starts with someone seeing your personal financial information on a paper check, billing statement, or account statement.” Direct deposit reduces the number of people who see an employee’s confidential information. • More convenient. Offering direct deposit enables employees to split their funds among accounts. That makes it more convenient for them to build their savings. Additionally, offering direct deposit prevents a twice-monthly mass exodus from your office to the banks. That is convenient for you as well as your employees. • Green. According to a 2009 press release from PayItGreen, an employee who uses direct deposit can “save almost a pound of paper every year.” Another press release from the organization illustrates the potential savings of paper for a company: “If a business that employs just 300 people and issues paychecks every two weeks switched to direct deposit, it would save 121 pounds of paper and avoid the release of 346 pounds of greenhouse gases into the atmosphere in one year.” Offering direct deposit also saves a company money. “Businesses saved a total of $6.7 billion over the last 10 years by switching employees to direct deposit,” according to the press release. “This is an average annual savings for each employee of $176.55.” If you like to save paper and save money, you will like direct deposit. How do I get direct deposit? The Payments Authority has a web page, “Put Electronic Payments to Work for Your Company,” that offers information about direct deposit and other forms of electronic payments. It’s a good place to start. You’re also welcome to take advantage of the 10 percent discount you’ll receive when you offer 100 percent direct deposit through The Small Business Authority. Our Payroll Pro and Payroll Pro Plus solutions include direct deposits, as well as an assortment of other benefits. We can help you save money and make your payroll faster, safer, and more convenient—and green. Call us at 866-820-8901, or visit our Payroll Plans page for more information.