Transcript HOLIDAY COMPANIES Overview - Northern Illinois Chapter

Electronic Funds Transfer
EFT Overview
MHC Software, Inc.
Jenny Mattson
[email protected]
(800) 588-3676 ext. 227
(952)882-3327 (DID)
MHC Software, Inc.
 Privately held, established in 1980
 Located in Burnsville, MN
 Lawson, Oracle, Microsoft Business Solutions Business
Partners.
 Provides Document Express, a payment solution with
document printing and distribution capabilities.
 Also provides Image Express a document imaging and
retrieval system.
 Over 600 client installations
 Local users include: Piper Jaffray, Holiday Companies,
Lifetouch, Famous Daves, Allina, and many more.
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Why Electronic Payments?
Electronic payments are a smart business strategy.
Save time and increase efficiency: Direct deposit helps you eliminate the manual, laborintensive process of disbursing checks and improves the efficiency of your payment
operations.
Reduce costs:
Fewer reissued checks
Less accounting work - reconciliation is easier
Lower production and administrative costs, reduced distribution and delivery expenses.
Negotiate better terms with vendors
Strengthen your cash management practices:
Control the deposit date
Elimination of delivery delays
Reduced costs can make up for the loss of check float
Improve employee benefits:
On average, employees paid by check spend between eight to 24 hours each year going
to the bank to deposit their paychecks.
No delays accessing pay when employee is out sick or on vacation.
Less of a disaster recovery concern
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Payment Facts
Provided by NACHA
 Trend Info - in 2002, an estimated 80% of
all business-to-business payments were
still made by check.
 The trend is moving more rapidly toward
electronic payments
 Approximately 14 billion payments were
made in 2005 growing the ACH Network by
16.2% over 2004.
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Consumer’s Beat out Business in EFT
Consumer Direct Deposit Payments Alone were
4.4 billion payments in 2005.
Business Payments
The total number of business-to-business ACH
payments grew to 2.0 billion in 2005, up 11.3
percent over 2004. Financial electronic data
interchange - the electronic exchange of paymentrelated information or financial-related documents
in standard formats between business partners on
the ACH Network - grew by 19.8 percent in 2005.
In 2005 there were 915 million EDI-formatted
remittance records accompanying ACH payments.
The number of financial EDI payments in 2005 was
255.6 million, up 20.3 percent over 2004.
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Why is Business behind?
 Payment related detail
 New process – checks are
familiar
 How do I set it up?
 What is the benefit?
 Controls on the ACH Process
 Check Float – the old argument –
Check 21 changes that.
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Payment Technologies Overview
 Checks

Negotiable documents which include a MICR Line (Magnetic Ink Character Recognition).
 Positive Pay

Check fraud prevention method offered by most banks where customer transmits a file of checks
to the bank.

Advent of positive pay plus allows payee name to be transmitted to the bank

Ineffective if not transmitted on a regular basis
 ACH (Automated Clearing House)

Electronic payments or credits completed in a standardized format that allow these payments to
be made anywhere.

ACH payments include Direct Deposit of payroll, Social Security benefits and tax refunds, Direct
Payment of consumer bills, e-checks, business-to-business payments, and Federal tax
withholdings.
 Wires

Electronic payments that are not revocable and can be done immediately (i.e. Real Estate
Closings). Less exposure to risk than ACH for large dollar amount payments.
https://www.nacha.org/OtherResources/riskmgmt/CORisk.pdf#search=%22w
ires%20vs.%20ach%22
Secure Seal – next slide
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Secure Seal
Used by the
US Treasury
for all
payments –
signature
contains the
seal.
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Definitions - EFT
EFT
“Electronic Funds Transfer”
is a generic name for
electronic payments
ACH
International or Domestic
Settlement time is 1-2 days
ACH payments may be
revoked for up to 60 days
NACHA Standards
Example: Direct Deposit
Wires
International or Domestic
Usually require 5 days
for settlement
Non-revocable payments
Example:
Real Estate Closings
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EFT Components - Steps
1. Format payment files into NACHA layout.
2. Transmit payment files to the bank - ODFI
(Originating Depository Financial Institute)
3. Send electronic remittance advices via email,
fax, or web posting.
Additional Features:
4. Provides reports
5. Accepts a return/confirmation file from the bank
6. File combining to reduce transaction costs.
7. Emails payment totals to funding department or
bank.
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ACH - Automated Clearing House
 ACH: Electronic payments or credits completed in
standardized formats that allow these banking transactions to
be sent anywhere in the United States.
 NACHA: The National Automated Clearing House
Association – The trade association for the electronic
payment associations, which establish the rules, industry
standards, and procedures governing the exchange of
commercial ACH Payments by depository financial
institutions.
 ACH Network: Funds transfer system governed by NACHA
rules which provides the clearing of electronic entries for
participating financial institutions.
Virtually every major bank is affiliated with NACHA or works
with a local clearinghouse.
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The ACH Network
Five Participants in ACH Process:
1.
Originator company or individual
2.
ODFI
3.
ACH Operator (FED)
4.
RDFI
5.
Receiver
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ACH Types


PPD (Prearranged Payment and Deposit)
 Designed for consumer accounts.
 Used for Payroll, Pensions, Electric Bill, etc.
 Allows for one Addenda Record
CCD (Cash Concentration or Disbursement)
 Designed for simple electronic payments.
 Allows for one Addenda Record.
 When an addenda record is included this format is called the CCD plus.
 Child Support payments are either CCD+ or CTX

CTX (Corporate Trade Exchange)
 Designed for companies with trading partnership or used when sending payments to the
government (I.e. child support payments).
 Allows for 9,999 addenda records per ACH payment.

CBR (Corporate Cross-Border Payment)
 This Standard Entry Class Code is used for the transmission of corporate cross- border ACH
credit and debit entries. Allows cross-border payments to be readily identified so that financial
institutions may apply special handling requirements for cross-border payments, as desired.
 The CBR format accommodates detailed information unique to cross-border payments (e.g.,
foreign exchange conversion, origination and destination currency, country codes, etc.).

Addenda Records
 Optional and they supply additional information about the Entry Detail Records or payment
related detail.
 The addenda record detail is machine-readable (EDI-Electronic Data Interchange). Each
addenda record can be up to 80 characters. If the addenda record exceeds 80 characters than
the data will wrap to the next addenda record. This allows for 800,000 bytes of data for each
ACH payment in the CTX format.
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File Transmission
 Payment Files are sent to the ODFI (Originating
Depository Financial Institution)
 Modem
 FTP with file encryption
 Internet Transfer
 Transmission options are bank dependent and may also be dictated
by internal IT preferences.
 MHC can provide any option.
 Receipt of bank confirmation file.
 Automatic email notifications available to funding department (i.e.
Treasury, Accounting, etc.)
 File combining to save on transaction costs.
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ACH Automation
Bank
Compliant
NACHA
Payment File
ACH Process
ACH
electronic file
transmitted
to bank
Document Express can provide additional formatting
(addenda records, headers, log in information, etc.)
or simply automate the transmission process.
Transmission options include:
Modem, FTP or Internet Transfer
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Document Express Remittance Delivery
Printing
file import




Document Format
Document Security
User Controls
Reporting
 Allows users to
keep Financial System vanilla
 MHC provides continuing
compatibility with your
Financials
 Automatic interface to
Financial System
Fax
Email
Web Posting
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Document Express e-mail
file import




Document Format
Document Security
User Controls
Reporting
Email
 E-mail to individual recipients
 Encryption option for sensitive docs
 SMTP and MAPI compatibility
 Pulls current e-mail address from the Vendor Tables or a
separate database.
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Document Express Faxing
file import




Document Format
Document Security
User Controls
Reporting
Fax
 Send reformatted documents to Fax Server.
 Fax number comes from output file, Vendor Tables,
or alternate database.
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Document Express Web Posting
file import




Document Format
Document Security
User Controls
Reporting
Web Posting
 Post documents to a Web Site, restrict access to
documents via username/ password, customized
filters and search criteria.
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Company Considerations Prior to
Implementing EFT
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Business terms
Payment methods
Remittance information distribution
Security of transactions
Notice of change handling
Vendor data collection
Audit trails
Accountability
Process management
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International ACH Considerations
 Internationally not all countries have an ACH-like clearing system, and
those with clearing systems have different settlement times and formats.
So know the rules.
 Foreign Bank Accounts are no longer required.
 What currencies are you dealing with? Are multiple currencies used?
 Are ACH reversals allowed?
 Is pre-notification available?
 Be aware of that different bank holidays can affect the dates the money
is deposited into foreign accounts.
 Make sure to understand the MICR Line or account information when
setting up the Customer account information in the ERP system.
 Additional resources at: http://www.frbservices.org/Retail/intfedach.html
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Costs
Check Costs
ACH Costs
 Average of $.85 - $1.75 per  Average of $.05 per ACH.
check.
 Company prints 50,000
checks per year.
 Company generates
50,000 payments per year.
 Average check costs $1.20  Company does 5,000
for a company that
payments per month generates 50,000
ROI in less than 6
payments the cost is
months!
$60,000.00 annually.
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The Future of Payment Technologies
 Steady increase in ACH business to
business payments
 EDI becoming more standardized and
mainstream
 Increased cost of check processing as
electronic business grows
 Expanded ACH offerings including
International ACH payments
 XML emerging to supplement EDI
 Increased government requirements –
Child Support.
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Child Support Payments
 Employers provide 70 percent of all child support collections,
states encourage employers to remit those payments
electronically. In fact, Illinois, Indiana, Florida, and
Massachusetts have passed legislation requiring specific
employers (of a certain size or remitting a certain number of
payments) to remit electronically.
 Ohio is mandating electronic payments this fall.
 States may also set up a Web-based payment service to
attract the small- to medium-sized employer who otherwise
would continue to remit by paper check.
 Options run through PR with Customized Process run
interface to AP.
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Questions
Document Express Software Demonstration
Electronic Payments
Jenny Mattson (800)588-3676 Ext. 227
[email protected]