ACH Payroll Processing & Fedwire Blog

ACH Payroll Processing & Fedwire Blog

How to arm yourself in the event of a payroll ACH emergency

Monday, September 12, 2016
How to arm yourself in the event of a payroll ACH emergency

No company expects to encounter issues with tasks they complete on a frequent basis. Yet some of the more important responsibilities often come with bigger risks. One of the largest obligations is processing employee payroll. This procedure is generally completed every two weeks, which gives human resources and payroll teams enough time to spot any problems.

Unfortunately, not every error is noticed. When emergencies arise, especially concerning direct deposit and payroll ACH, service bureaus and payroll processors need to have measures in place to recover. Let’s take a look at how these companies can prepare themselves in the case of any serious payroll ACH issue:

A disaster recovery checklist covers every element that could go wrong.A disaster recovery checklist covers every element that could go wrong.

Create a disaster recovery plan
When serious risks happen, payroll processors have to act fast. Not only can payroll ACH issues put the company in jeopardy, but valuable information may be less secure than leaders would like. Should an emergency occur, including a data breach, it’s critical service bureaus have a plan in place to ensure reactions are efficient and effective. There are certain steps that should be included in this breakdown, according to Privacy Technical Assistance Center, including:

  • identifying the incident response team
  • incorporating applicable data breach legal requirements
  • establishing employee expectations
  • creating team roles, responsibilities and access credentials
  • developing a course of action and procedures for communication
  • assigning a team manager who is in charge of incident response
  • regularly reviewing the policy

These steps are designed to foresee every problematic situation that can arise concerning poor data security. By anticipating an emergency, payroll processors can be better prepared to get their payroll ACH processes back up and running quickly and safely.

“The partnership between service bureaus and their banks is a critical element of efficient payroll ACH processing.”

Talk to your bank
Since financial institutions are the middleman in the payroll ACH process, service bureaus should work hand-in-hand with their banks to devise a system of reviewing debits and credits on a regular basis. According to CSO Online, both positive pay and reverse positive pay are strong tactics service bureaus can use to avoid payroll ACH problems that could cause their banks to cut them off.

Positive pay enables customers to review debits before they’re posted and allows clients to decide which items to accept or return on an individual basis. Reverse positive pay gives payroll processors the ability to analyze incoming payroll ACH debits and either accept or reject each transaction. At the end of the day, monitoring these accounts is crucial and payroll processors should take the steps that make their procedure the most secure.

Establish a credit and debit cap
When it comes to payroll via payroll ACH processing, transmission errors – particularly surrounding insufficient funds – are a common issue. If credits are sent through before the payroll processor has the correct amount of money in its account, the entire procedure can be thrown off. The payroll ACH items are returned to the sender, and if the account is closed or is suffering from a negative balance, the service bureau could truly suffer.

To ensure these issues are few and far between, service bureaus can work with their financial institution to establish credit and debit exposure limits, according to Federal Reserve Financial Services. This way, instances of insufficient funds are reduced. In addition to setting these caps, it’s vital for service bureaus to regularly perform audits. These practices will ensure their level of risk is as low as possible. By taking these two proactive steps, payroll processors and banks can work together to lower the chance of problems stemming from the transmission of funds.

Have a backup payroll ACH provider
If – or when – a payroll ACH problem occurs, service bureaus can use this backup ACH provider to rectify the situation as quickly as possible.

Payroll processors should efficiently inform their customers if an ACH problem occurs.Payroll processors should efficiently inform their customers if an ACH problem occurs.

Quickly inform customers
There's nothing worse than having clients tell their payroll processor about a payroll ACH emergency. It’s vital for service bureaus to get out in front of their customers and share the news first. In addition to this notice, service bureaus need to let organizations know they have a plan in place to handle the issue. Distributing the details of this strategy isn’t completely necessary, but elements like the ability to send live checks in lieu of electronic payroll can ease tensions if shared with clients.

Create a disaster post-mortem
Payroll processors can learn a lot from emergencies stemming from payroll ACH. After solving an issue create a disaster post-mortem. This breakdown tracks all of the actions these parties took to discover, halt and fix the situation once it occurred. The post-mortem will take a closer look at how efficient a payroll processor’s disaster recovery plan was and how it needs to be altered to become even more effective in the future. There’s always room for improvement, so this process should be utilized no matter how severe the issue.

Anticipation is key when dealing with payroll ACH emergencies. Whether it’s transmission errors, data breaches or insufficient funds, small issues can become large challenges if they're not tackled efficiently. It’s crucial for HR and payroll leaders to prepare themselves adequately in advance for the potential of problems. By devising an emergency response plan, working with one’s bank, setting credit and debit caps, selecting a backup payroll ACH provider, informing customers effectively and developing a disaster post-mortem, payroll processors can hopefully stop errors in their tracks before they affect their customers.

Cachet Financial Services offers service bureaus and payroll processors payroll ACH processing for direct deposit, tax payments, expense reimbursement and more. Their web-based system provides efficiency and control, while ensuring customers and employees receive their payments in a timely manner.

Contact us to learn more about dealing with ACH payroll processing emergencies

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