When you opt for direct deposit, your business plays no part in this environmental damage. Less commonly discussed is the amount of carbon emissions involved in postal mail. It’s common knowledge that paper use is bad for the environment. Plus, assuming your payroll service and bank implement thorough cybersecurity measures, all direct deposit data will be encrypted. Direct deposit eliminates the possibility of this increasingly common form of fraud. In 2020, stories abounded about “ mailbox fishing” – namely, fraudsters stealing checks from mailboxes and altering their amounts and recipients. Still, direct deposit is a much shorter process than printing and mailing checks – and often, employees, not you, add their info. Yes, in some cases, you’ll initially need a few minutes to collect and enter your employees’ information. Direct deposit, on the other hand, is a fully automated process. Each of the costly paper-check printing and mailing steps is also tedious and time-consuming. Spread across your whole team, that can add up to huge savings. Direct deposit has none of these expenses and can be up to $3 cheaper per paycheck. Additional postal costs come into play if you mail checks rather than hand them out in person. You have to buy special paycheck paper and printer ink constantly, and that’s after the often substantial spend on a laser or inkjet office printer. Small business owners often prefer direct deposit to paper checks or cash for these reasons: Direct deposit benefits for small businesses owners Below, we’ll explain some key direct deposit benefits for both groups. That’s primarily because direct deposit is tremendously beneficial for both small business owners and employees. employees receive their paychecks through direct deposit. What are the benefits of direct deposit?Īpproximately 93% of U.S. While direct deposit is a form of ACH payment, many businesses also accept ACH payments from customers, which is a significant convenience for customers who don’t want to pay by credit card. The process typically takes one to two business days. Assuming you have enough funds, each employee’s bank will receive your deposit, credit the employee’s account accordingly and debit yours. If you don’t have enough funds in your account when your bank sends all your direct deposits to the ACH, your deposits won’t go through. The “clearing” that takes place in the “house” is the approval of your deposits. The organization National Automated Clearing House Association (Nacha) oversees this process. The abbreviation “ACH” signifies “automated clearinghouse,” which indicates that your deposit has gone through the American financial system. How does direct deposit work?ĭirect deposit is a form of ACH payment. However, in this article, we’ll discuss direct deposit as a method of paying employee wages. If you forgo paper checks and your employees log in to their bank accounts on payday for proof of payment, you’re paying by direct deposit.Īside from wages, people also receive other income through direct deposit, including child support, Social Security benefits and tax refunds. In a small business context, direct deposit means electronically delivering employees their wages (with payroll taxes deducted when applicable). What is direct deposit?ĭirect deposit is the electronic transfer of money from one bank account to another without paper checks or cash. It helps that it’s super easy to set up direct deposits for employees. There’s a reason for that – actually, there are many reasons why direct deposit is the dominant way to pay employees. These days, it can seem like everything that once existed on paper has moved entirely online, and that includes paying your employees. This article is for small business owners looking to set up direct deposits for employees.There are six easy steps you should take to set up direct deposits for employees.Direct deposit is easier, faster, and more eco-friendly and secure for both employers and employees.Direct deposit is the electronic transfer of wages from your bank account to your employees’ accounts.
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