A safety net when moving to ACH
May 8, 2008 by Jennifer AzaraPosted in: Cash flow, In this week's e-newsletter, Latest news & views, Technology
If your company could stand to scale back paper checks (and whose couldn’t?), ACH is a great choice. That doesn’t mean people, in and outside Finance’s four walls, won’t be nervous about such a move.
Here’s a two-step strategy that will ease those fears and give you a backstop to catch any “transition problems.”
You’re probably not going to dive headfirst into the electronic payments pool. There is a way to test the waters that will let staffers get more comfortable: Start small.
You might start with one type of bill — or one vendor. Not all candidates are created equal, though.
As far as bill type, utilities are a good fit. After all, even consumers can pay their utility bills electronically, so you know the vendors are well set up to receive your payments. They can directly debit your account via ACH. As staffers get more comfortable, you can add additional categories of bills.
If you start with a single vendor, resist the urge to go with one of your highest volume suppliers, unless that company doesn’t provide you with “mission critical” goods or services. You may be better off starting with someone less integral to your company’s day-to-day operations.
Once you’ve decided where you’ll start, you probably want a way of keeping close tabs on those ACH payments. One finance exec in the Midwest set up a zero-balance account just for his company’s ACH payments.
A dedicated staffer eyeballed the account every day to monitor what was moving out of that account. They even caught an error once, thanks to their vigilance (one that was easily resolved). It didn’t even wreak havoc with reconciliation – everything swept into a single account.
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Tags: Accounts Payable, Automated Clearinghouse (ACH), bank, paper checks, vendors
May 8th, 2008 at 11:28 am
Great article!
May 13th, 2008 at 2:02 pm
We are in the initial stages of putting this into practice with MAS200. I have one suggestion for those organizations that have segregation of duties between accounts payable and those that prepare journal entries. To avoid transferring work and potentially blurring the line between duties, work with your software vendor to see if they offer an enhancement to processing ACH transactions in the same manner as check transactions. This feature will save your organization time and money over the long run by treating ACH transactions similar to a check run that produces a register and journal while maintaining internal controls.