PROBLEM: I'm currently paying my employees by check, but I'd really like to start paying them via direct deposit. What do I need to do to start paying them via Direct Deposit?
SOLUTION: There is a bit of setup to begin paying your employees by direct deposit, instead of a paper check, but once it's all set up it's a breeze to maintain!
There are two ways you can prepare the direct deposit information:
- ACH - Automated Clearing House
- NPC - National Payment Corporation
National Payment Corp is an actual company that will provide the service of transferring the funds for you.
Automated Clearing House is a type of file that most banks accept for transferring the funds for direct deposit.
So what does that all mean?
If your local bank is going to perform the direct deposit funds transfer for you, use ACH. Most churches will use ACH.
If you choose not to use your local bank and want an outside company to assist you in transferring the funds for direct deposit, contact National Payment Corporation to set up an account, and choose NPC.
Step 1 - Set up the Church/Employer Information
The first thing you'll need to do is set up the churches bank information in the CMS Payroll System.
From CMS Payroll, click Options | Employer Info.
Enter the Church/Employers Name, address, phone, Federal Tax ID and State Tax ID numbers in the fields provided.
National Payment Corporation Setup
If you are going to use NPC and already have an account with them, enter your NPC Account Number, Encode word and Password in the fields provided. If you are using NPC, you can
- NPC Account - The account Number Given to you by National Payment Corporation.
- Encode Word - The security encoded word given to you by NPC.
- Password - The password you use to access your NPC account.
Automated Clearing House Setup
If you are going through your local bank, and will be using ACH instead, you can leave the NPC Account, Encode Word, and Password fields blank.
- Immediate Destination - the name of the service or institution that will be performing the direct deposit funds transfer.
If you're using your local bank, this will be your local bank's name.
If you're using a third party service to help with your funds transfer then it would be that third party's name, i.e. Vanco Services.
- Destination Routing Number - the ABA (American Bank Assocation) routing number of the service or institution who will be performing the direct deposit funds transfer.
If you're using your local bank, this will be your local bank's routing number.
If you're using a third party service to help with your funds transfer, i.e. Vanco Services, then it would be that third party's routing number.
- Origin (Bank) - type the name of your bank.
- Account Number - Type the bank account number from which funds will be distributed, i.e. the church's checking account number.
- Bank Routing Number - the Routing information as provided by your bank.
- Account Type - Choose either Checking or Savings.
Step 2 - Gathering the Employee's Information
You'll need to gather the bank information from each employee who would like to have direct deposit. Ask each employee for a voided check or deposit slip, which should contain all of their bank's account and routing numbers!
NOTE: Your employees may want to transfer their deposit into multiple banks. This is perfectly fine in CMS! You can distribute their paycheck to one, two or 58 accounts (okay, that would be a bit excessive!!). You'll just need to gather the bank account and routing number for each bank, and find out how much the employee would like distributed to each of their accounts (either amount or percent).
You'll need to locate the Account Number and Routing Number on the Check or Deposit Slip. These are two examples of the Routing and Account Numbers on a check or deposit slip:
Step 3 - Entering Employee's Bank Information
Once you have the employee's bank information, from CMS Payroll, click Enter/Change Employees and find the employee who would like the direct deposit.
Click the Direct Deposit tab.
Choose the Direct Deposit Participation, either National Payment Corporation or ACH File.
If the employee wants their funds deposited only in one bank account, you can choose to Distribute to Accounts By: and choose Percent.
Enter the Bank Account Number and Bank Routing Number from the check or deposit slip the employee provided to you. Select either Checking or Savings Account in the Account Type field, and enter the percent of 100.00.
If the employee would like their funds deposited to multiple bank accounts, you can choose to either distribute the funds by Percentage or Amount.
Enter the Employee's Bank Account Number, Routing Number, and Account Type. Then enter the requested distribution for that bank.
If the employee would like to have a set amount go to one bank account, and the remainder to a second account, enter the set amount in the amount column for that bank. Then leave the amount field blank for the bank account where the remainder will be deposited. CMS will calculate how much will go to this bank as you calculate the payroll!
Step 4 - Process Employee Prenotes
You must prenote or pre-notify an employee at least 10 days prior to their first direct deposit. The prenote process provides your ACH service bank with employee information from the information you entered in the Direct Deposit tab in Step 3.
This information is verified for accuracy with the employee's receiving bank prior to allowing funds to be electronically transferred.
This step will ensure that the funds you transfer will actually make it into the employee's bank account, and not another bank or bank account!
If the employee changes bank accounts, the prenote process must be completed with new bank account information.
From CMS Payroll, click Process | Prenote Employee.
Select either National Payment Corp or ACH and verify the employees selected.
NOTE: Only employees listed on this Prenotify Employees display will be included in the prenote. If you are missing any employee from this list, click Cancel and verify the information you entered on the Direct Deposit tab for that employee.
Insert a diskette, jump drive, zip drive, or formatted CD-R in your drive and enter the entire path and file name to output the file.
You can click the Report button on the right to print a report of the file you are sending to your bank.
Click the Output button on the right.
You can now mail, email, or upload that file to your bank. Contact your local bank for instructions on how and where to send this file.
NOTE: If there were any problems with the information submitted, you will be contacted by your bank and you must change the incorrect information entered on the employee's Direct Deposit tab, or the Employer Info off the Options menu, depending on what information was not correct.
If all of the information was correct, you should be able to create your first Direct Deposit in 10 days!
You will not be able to create the direct deposit earlier than 10 days. If you have a payroll within that 10 day period, you must print checks.
Step 5 - Prepare Payroll
Enter Timecards, Calculate Payroll, and print your Payroll Summary report as normal.
From CMS Payroll, click Print Paychecks/Direct Deposit.
Choose the appropriate Payment Method of either NPC Direct Deposit, or ACH file. Click Next.
Verify the total of the deposit for the direct deposit checks.
Enter the Effective Date of the Direct Deposit.
You can choose to include a debit to your bank account in the ACH file. If you plan to make this transaction manually later, do not check this box. Click Next.
Enter the entire path and file name to output the file. Click the Output button on the right.
You may also choose to print a report of the data you are transmitting. Save this report for your records. Click Report.
The CMS System will automatically assign an Electronic Check number to each person receiving a Direct Deposit. Click Next.
You will next be prompted to print the Direct Deposit Receipts that can be issued to the employees.
NOTE: You will not be given another opportunity to print the Direct Deposit Receipts, so be sure to print them now. If you forget to print the Receipts to your printer, you must remove the Electronic Check number from each employee and run through the process again.
Finish by printing your remaining paycycle reports, backing up your system, and posting payroll as normal!