What do you know about electronic funds transfer (EFT) ?

Electronic funds transfer (EFT) is essentially an exchange of currency by digital means – in other words, money being transferred from one account to another using a computerized system, whether it is within the same bank or between several financial institutions.

The term consists of several key elements, such as:

• Transactions made by the owner of a debit card, credit card or other payment cards
• Direct deposits made to a supplier’s account by a client/payer
• A business cashing in direct debits (also known as electronic checks), as a result of debiting a customer’s bank account to pay for goods or services
• Bank transfers made within a network of international financial institutions
• The payment of electronic bills via online banking

This article will particularly cover direct debits and direct deposits, which generally tend to have a slower processing rate.

There are many advantages to paying via EFT…

• It is proven that EFT payments are more secure than checks
• They offer reduced costs for bank charges and postage fees
• They eliminate printing and production costs related to checks and payment notices, that are instead sent by email
• Payees no longer have to worry about their payments being stolen or misplaced
• EFT is a fast, secure, accurate and efficient method of sending money
• Payees do not have to be physically present at the bank, thus reducing their wait time
• The processing time of EFT payments is faster than check payments sent by mail; on top of that, EFT funds become available to the payee on the same day the bank receives them
• Payment notices are delivered by email
• EFT payments alleviate the accounting staff’s workload by cutting down on mailing procedures.

EFT payment systems include the following functionalities:

• Bank data entry is facilitated for customers and suppliers alike, thanks to the automatic transfer of both payer and payee account profiles
• The ability to activate and deactivate accounts exactly when required
• The file formats are compatible with all Canadian and international banks
• The creation of bank files from existing payment and collection functionalities within the ERP system
• The ability to combine several payments into a single amount in order to facilitate bank reconciliation

What are the steps for processing a payment to the bank in Canada*?

There are two stages to money being transferred through a payment system. It is first cleared, then settled. Clearing a payment refers to the daily process of Canadian Payments Association (CPA) members exchanging deposited payments, which determines the net amount of their mutual obligations at the end of the day. The process of CPA members honoring their net obligations via funds deposited at the Bank of Canada is known as “settlement”.

Aside from cash, all payments are settled via two systems:

• The Large Value Transfer System (LVTS), is a Canadian electronic wire transfer system that facilitates fast and continuous processing of large and critical payments throughout the day.

The LVTS has processed an average of 24,000 daily payments with an approximate total value of $149.4 billion in 2010.

• The Automated Clearing and Settlement System (ACSS) processes the majority of regular payment items in Canada, including checks, direct debits, pre-authorised debits, Interac debits, debit card transactions and e-transfers.

The ACSS processed an average of 23.9 million daily payment items with a combined value of $20.4 billion in 2010. Paper bills constituted 15.4% of all cleared and settled bills’ volume and 55.9% of their value. Conversely, electronic wire transfers amounted to approximately 84.6% of the volume and 44.1% of the value.

How to integrate EFT with Dynamics Business Central and to what end?

It is now possible to integrate EFT functionalities into an ERP (Enterprise Resource Planning), or IMS (Integrated Management System) like Dynamics 365 Business Central. The ability to update accounting records, payable and receivable accounts, and account statements allows you to save a great deal on time and resources alike!

Integrated with the Microsoft Dynamics 365 suite, Business Central is a tool that has been specifically designed to provide your business with this kind of functionality. In addition to managing the supply chain and distribution, Business Central allows you to generate invoices and manage data related to wire transfers. With the system’s automatic updates of account data, you will be able to save time and money by avoiding the need for manually handling each individual transaction. In the same vein, you will also considerably reduce the risk of human factor error.

The main advantage of using Business Central is the ability to consolidate your day-to-day operations and your data within a single system. You can save yourself the trouble of having to navigate from one platform to another to retrieve all the important information on a file: you benefit from seeing the bigger picture of each contract’s data. It is a centralized source of information, fed by the data enhanced and collected from various implemented modules, that supports you in project management, budget creation, ledger keeping and the generation of reports custom-tailored to your needs.

If you would like to know more on the various electronic funds transfer (EFT) applications and payment systems, Gestisoft professionals are always here to provide valuable insight on the subject!