What is EFT?
Electronic Funds Transfer is simply the process of moving money from one bank account to another. You may be familiar with it if you pay bills online: that is just a transfer from your chequing account to a company like a utility or a credit card carrier. EFT is the business version of the same process.
EFT for Payroll
Paying employees by "Direct Deposit" is the most common use of EFT by small businesses and other organizations. It works by having your payroll program such as PayDirt Payroll Pro create a payment file instead of printing cheques.
The exact format of the file varies depending on the bank, but it will contain:
You then transfer that file to the bank, usually via a secure web site designed for that purpose.
The Payroll program prints out a payment advice for the employees to give them the same information they would usually receive on the cheque stub. Some programs, such as PayDirt Payroll Pro also allow you to e-mail the advices to the employees.
A service called Telpay for Business provides the same services. It's fees are similar those charged by the banks. but may represent cost savings when combined with EFT for Payables (below).
This process is particularly valuable where employees are in locations other than the office where the payroll is being processed.
EFT for Payables
The use of Electronic Funds Transfer to pay vendors is expanding rapidly, so much so that banks are reporting a significant drop in the number of cheques they clear each year. The process is much like payroll direct deposit. Adagio Payables offers two ways to do it: with Telpay and directly through your bank.
EFT to vendors via your bank
Using an add-in product called EFT for Adagio Payables, the usual payment processing in Adagio Payables generates a file for your bank instead of printing cheques. EFT for Adagio Payables includes creating the file format for your bank if it is not already included in the program.
You can e-mail the advices to your vendors. The file is transferred to your bank which then disburses the funds to your vendors' accounts.
Of course, you must obtain the account information for your vendors (bank number, transit number, account number).
EFT to Vendors via Telpay for Business
The file format is built into Adagio Payables, so you need only set up your account with Telpay and turn the option on in Adagio. You can set up your vendors' e-mail addresses and send them an advice similar to the one that is usually attached to the cheque.
You identify your vendors by name, address and telephone number; Telpay takes care of getting their bank account information if it is not already on file.. Telpay also sends an e-mail or fax advice to each vendor listing the invoices you are paying and the amounts.
Telpay uses codes that must be provided by the approved account signatories before funds are released. This can be done by a special e-mail process if one of the people is out of the office.
EFT can save time and money compared to printing cheques, getting them signed and putting them in the post. While a major change in your payables processing should not be entered into lightly, the benefits make EFT worth considering seriously.