ACH Origination Product Information

What is ACH Origination?

ACH Origination is an exciting service offered by Peoples First Community Bank that allows any business customer to originate electronic transactions. Organizations that originate these transactions are called Originators. Transactions can be either debits or credits. Examples of debit transactions include utility payments, account drafts, membership fees, dues, insurance premiums, etc. Credit transactions are usually for Direct Deposit of Payroll, electronically crediting a deposit account for the net payroll amount.

What is the ACH?

The Automated Clearing House (ACH) was formed in 1974 to provide a nationwide network for distributing electronic transactions. The National Automated Clearing House Association (NACHA) has 36 participating regional associations, all of which use the same format for ACH transactions. Since all financial institutions are required to accept ACH, transactions can be posted to any bank, credit union, or savings and loan within the Federal Reserve system. Over 4 billion transactions representing over 14 trillion dollars flowed through the ACH system in 1997.

Why would my organization be interested in participating in ACH Origination?

Participation in ACH Origination can reduce the costs associated with manually processing debits and credits. The cost to create and distribute payroll checks ranges from $ .50 to $2.00 per check. If you factor in the hassle of employees trying to get a deposit in on time, second or third shift employees, and absent or sick employees, manual payroll distribution can negatively impact your organization. The cost of Direct Deposit of Payroll using ACH Origination is only a fraction of the cost of manual processing.

Similarly, the cost of manually creating invoices, mailing them to customers, providing a return envelope, waiting for checks to be mailed, and creating deposits averages $1.00 to $3.00 nationally. Some organizations have begun utilizing a "lockbox" operation where payments are mailed to a P.O. Box and processed by a third party, then a single check is sent to the organization. However, lockbox processing still does not get money to your account and can be more expensive than ACH due to paper and mailing costs. Direct debit using ACH Origination is the most cost-effective way of processing any type of receivable that is currently handled manually.

How will payments be settled to my account?

The offset of the transactions you originate will be posted to any Demand or Savings account held at Peoples First Community Bank. For example, if you originate $5,000 in Direct Deposit credits, your account will be debited for $5,000. If you originate $5,000 in debit transactions, your account will be credited for $5,000.

What effect will ACH Origination have on my cash flow?

ACH Origination can improve cash flow dramatically. For example, suppose you are sending invoices on a monthly basis. You mail invoices 4 times a month; however, your customers send in payments whenever they get around to it. This means incoming cash is delayed. With ACH Origination, you would create 4 transaction files and send them to Peoples First Community Bank. On the date the transactions are to post (the effective date), your account would be credited with the entire amount of the transactions. No more waiting for your customers to remember to mail you a check!

Four forms of ACH Origination offered by Peoples First Community Bank

1. Direct Deposit

   Direct deposit is the most common transaction using the ACH network. Direct Deposit allows a business to pay an employee for payroll, expense reimbursements, bonuses, pensions, and dividends to a checking or savings account at a financial institution located in the U.S.

   • Direct deposit saves the time and cost of making a trip to the bank to deposit funds.
   • Direct deposit means no chance for a paycheck to be lost or stolen.
   • Originating companies reduce leave time for employees.
   • Direct deposit is convenient, safe, and reliable.
2. Direct Payments

   This is used for recurring payments to a business. A customer may give a business authorization to have the payment debited directly from their checking or savings account at a financial institution located in the U.S. This can be used to collect club dues, rent, utility, insurance, and mortgage payments.

   Improves cash flow of a business by:
   • Reducing processing costs.
   • Funds are made available immediately upon deposit. (no holds)
   • Improves collections.
   • Receiving fewer return items.
   • Enhancing customer retention.
   Benefits to the Consumer:

   Direct payments means no writing checks to pay bills, no stamps to buy for mailing payments. Payments are never late, because the timing of direct payments is set up in advance. On-time payments help create and maintain a good credit history. Only transactions a customer authorizes in writing can be debited from their account.

3. Cash Concentration

   Cash concentration allows a business to consolidate funds to a central account from the business' branches or stores quickly and more cost effectively. This application eliminates costly wire transfers and check transfers improving a business' total cash management.

4. Represented Check Entry (RCK)

   This is for those businesses with a large volume of payments made by checks. A business can use the ACH network to collect checks returned for insufficient funds or uncollected funds drawn on consumer accounts. A check can be presented a total of three times. The check can be electronically presented twice after the first return of a paper item or it can be electronically presented once after the second return of a paper item. This allows the business a less expensive, and quicker alternative to collect checks returned for insufficient funds and uncollected funds.

   • RCK reduces costs to represent checks by .25 to .50.
   • RCK provides higher collection rates - up to 80% higher.
   • RCK is cost efficient for small dollar checks.
   • RCK stops bad check writers faster.

How do I get Started?

Simply give your nearest Banking Center a call. One of our Business Bankers will meet with you to discuss your business and the potential benefits of establishing ACH service. There is a brief application, and we will need to collect financial information as the service does involve a credit component.