NACHA – The Electronic Payments Association survey released in November 2011 shows 66 percent of U.S. small business owners do not use direct deposit for payroll – a decision that can cost those businesses thousands of dollars every year. In addition, the survey calculated only 30 percent of the businesses offering direct deposit have 100 percent employee participation, even though easy ways exist to increase employee enrollment. The survey also discovered that on average small businesses pay 96 vendors a month, and these businesses "could save thousands annually" by switching these vendors to direct payment. NACHA determined direct payment can save up to three days of employee work time annually.In addition, NACHA found checks cost businesses up to $2 each to cut and process, while direct deposit amounts to only 35 cents per transaction; this cost difference could save a business with 100 employees as much as $7,000 a year.NACHA also pointed out that direct deposit is a green service that reduces the carbon footprint of those using it. NACHA and its PayItGreen coalition have developed a free program to calculate carbon footprint savings for switching to direct deposit.
The calculator can be found at www.payitgreen.org/business/dirDepCalculator.aspx.
Direct Deposit is one function of the ACH Network . The employer's bank account is debited for the payroll total dollar amount. ACH Credits are then initiated into the individual employee bank accounts. Typically the debit to the employer account must happen 2-3 days before the employee account is credited.
The rationale behind this timing is one of ACH risk mitigation on behalf of the third party payment processor. An ACH debit is not an instantaneous transaction-it may take 2-3 days before the payroll debit amount to "clear". Without waiting for this important information the third party processor could be crediting the employee accounts with their own funds rather than the employer.
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