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Accounting Best Practices, Fifth Edition by Steven M. Bragg Englewood, Colorado

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3–40. Issue ACH Payments with Remittance Detail

Larger companies have been able to pay for invoices with Automated Clearing House (ACH) transfers for some time. Their accounting systems create a file of the amounts to be paid and link this to a file containing the banking information for their suppliers. This file is sent to the company bank, which processes ACH payments overnight that appear in the bank accounts of suppliers by the next morning. One problem: The suppliers have no supporting detail for the payments except for the name of the initiating party, which appears in the information transmitted by the bank. The result is a callback to the company, asking for the detail so the supplier can properly post the receipt information in its accounting system. This extra contact essentially eliminates the time saved by the originating company when it first set up the ACH payment system. Some companies have created a system that issues separate payment notifications by mail, but this extra system requires manual labor and results in supporting detail that arrives in the mail days later than the payment.

An alternative approach is the EPN STP 820 standard, which is short for Electronic Payments Network, Straight-Through Processing, standard 820. This standard allows companies to issue ACH payments along with only the most necessary payment information, which is as follows:

  • Customer account number (mandatory)

  • Customer name (mandatory)

  • Invoice gross amount

  • Amount paid

  • Invoice number

  • Discount ...

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