E-Business

EFT- Electronic Funds Transfer Benefits

Electronic Funds Transfer (EFT) is the process of moving transaction funds from a one bank to another via the Automated Clearing House of the Federal Reserve Network.

EFT's process pre-authorized debits or credits from one bank account to another without using a check. This electronic computer based process requires the use of special licensed software and a modem. All transactions are governed by the Federal Reserve Banking System.

For those familiar with ATM cards at gas station pumps and grocery store check out lines, the concept of EFT's continues to earn the confidence of consumers and is therefore being applied in more and more settings. Over the past several years, EFT's have gained in popularity among businesses as well. Now any business, regardless of size, can use EFT's to conduct a variety of financial transactions.

The benefits of EFT's are many. For receivables, benefits include prompt payment of your customer's bills each month and early notice of insufficient funds. You get your cash on time, every time. While there's a small fee per transaction for this service, EFT's eliminate the need to print, process and send a monthly bill in many instances. This can save you as much as $2.25 to $3.00 or more per customer. Thus, you could lower your costs for labor to prepare statements as well as postage and the cost of paper used to print statements. EFT's also reduce late payments and the need to send out reminder notices.

EFT's can actually increase your customer retention. This is most likely to occur in businesses that bill the same amount on a month to month basis for ongoing services such as pest control companies, newspapers, pool services, security companies and the like. Having the fee automatically deducted from your customer's checking account increases the retention of those who might otherwise let the service lapse.

You can save hundreds, even thousands, of dollars on your billing and administrative costs, dramatically improve your cash flow and eliminate many of your collection hassles by using the EFT services.

While you are saving money, your customers benefit from EFT's as well. Customers will no longer have to worry about missing billing deadlines. Bills are paid even when your customers are away from home. No more writing checks, no more postage, no more service charges for checks and no more embarrassing second billing notices and late payments. EFT is free to your customers and your customers will appreciate this value added service.

How does the EFT transfer process work?

In a retail or consumer situation first you have your customers to sign a form that authorizes you to deduct their payment on a certain date. Your customers provide you with a checking deposit slip to verify all account information. Then you create the initial database. According to the billing cycle, the amount of your customer's bill is then automatically debited from their checking account and deposited into your account. In the case of payroll, your account is debited and your employee's account is credited each pay period.

In a business to business situation this process usually is controlled by the paying business. A group of payable items are authorized for EFT payment through the accounting system, which electronically notifies the bank to initiate the EFT payments.

How much time is required to establish the initial EFT database?

It only takes a few seconds per customer or business to input name, bank account number, routing transit number of their bank, the amount of the debit, and the due date. It's that simple! Once the database is established, the only component that changes each billing cycle is the due date and perhaps the monthly charge.

All EFT's are governed by the Federal Reserve Banking System. Only pre-authorized transactions are allowed to be processed. This is strictly enforced by the Federal Reserve. Customers must authorize all EFT debits from their checking account in writing.

Once the required data elements are electronically transferred, the data becomes encrypted. Neither the service bureau nor a computer hacker can access this file and decipher this sensitive information.

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