ACH AUTOMATED CLEARING HOUSE (ACH) PROCEDURES AND ... · ACH PROCEDURES & REFERENCE GUIDE 2...

ACH AUTOMATED CLEARING HOUSE (ACH)

PROCEDURES AND REFERENCE GUIDE

HeritageBankNW.com

ACH PROCEDURES & REFERENCE GUIDE

1 800.455.6126 | HeritageBankNW.com A Community of Banks – Whidbey Island Bank & Central Valley Bank

Table of Contents

Table of Contents .................................................................................................................. 1

ACH Origination Introduction ............................................................................................... 2

Security Token ...................................................................................................................... 2

Creating a Batch Template .................................................................................................... 2

Update an Existing Participant ............................................................................................. 4

Assign Participant to Batch .................................................................................................. 6

Approve Batch....................................................................................................................... 8

Send ACH/NACHA File .......................................................................................................... 9

Approve ACH/NACHA File................................................................................................... 10

ACH Reference Guide ......................................................................................................... 11

Facts & Guidelines .............................................................................................................. 11 ACH Facts .........................................................................................................................11

ACH Legal Framework ........................................................................................................11

Your Responsibilities as an Originator ....................................................................................11

Cutoff Times ......................................................................................................................11

Direct Deposit Payroll Authorizations (Consumer) ....................................................................12

Consumer Debit Authorizations .............................................................................................12

Corporate Authorizations .....................................................................................................12

Changing Date or Amounts of Debits .....................................................................................12

Pre-Notifications (Prenotes)..................................................................................................12

Notice of Change ................................................................................................................12

Common Notification of Change (NOC) Codes ........................................................................12

Returns .............................................................................................................................13

Common Return Entry Codes ...............................................................................................13

Deleting an ACH Batch ........................................................................................................13

Reversals ..........................................................................................................................13

Fraud Prevention Measures .................................................................................................14

NACHA File Standards ........................................................................................................14

Definitions ........................................................................................................................... 14

Sample Authorization for Direct Deposit (ACH Credit) ...................................................... 15

Sample Authorization for Direct Payment (ACH Debit) ...................................................... 16



ACH Origination Introduction An Automated Clearing House (ACH) transfer is the electronic transfer of a file which contains information to transfer funds between banks. An ACH transfer generally consists of multiple transactions and is referred to as a Batch. An ACH transfer can be completed by logging onto business online banking at www.HeritageBankNW.com to create a Batch Template and/or Send an ACH/NACHA File.

Security Token Securing your information is our priority. You will receive a Security Token and an associate will assist you with the activation process during training. Every Security Token is unique to its owner. You will be prompted for your six-digit number displayed on the front of your Security Token during the ACH approval process.

Creating a Batch Template NOTE: If your accounting software creates an ACH/NACHA file, you may proceed to Send ACH/NACHA File on page 9. Step 1: From the Payments & Transfers menu, select Maintain Batch Template. This will allow you to define the essential characteristics of the ACH batch: template name, template description, ACH transmission type, ACH ID and the offsetting account. This screen allows you to create new templates, and also update or delete existing templates.

Click Add New.

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Enter the Batch Template Information.

Template Name – Choose a name to identify the template (e.g., Payroll or Payments). Template Description – For receiving party reference (e.g., Payroll or Payments). ACH Batch Class – Dropdown menu: CCD – corporate to corporate payments, or PPD –

corporate to personal payments.

ACH ID – Dropdown menu: select your company name and Tax ID. Create Offsetting Transaction – Box should be checked. Offset Account – Dropdown menu: Select the Heritage Bank account you want to use to offset

the ACH transactions.

Click Add.

Add New Participants The participant is the individual or corporation who will be affected by the ACH transaction. The ACH participant’s bank account may be credited or debited by the ACH transaction (e.g., a payroll deposit or a payment for services rendered). Step 2: From the Payments & Transfers menu, select Maintain Participant. This will allow you to add the participant’s bank account information and also update or delete existing participants.



Enter the participant information under Add Participants (You can add up to three participants at a time).

Participant ID – A unique name assigned and used to identify each participant. Participant Name – Name on the bank account you are submitting your ACH payment to/from

(employee or vendor name).

Routing Number – Routing number of the receiving bank (We recommend requesting a voided check to ensure a valid routing number is used).

Account Number - Account number at the receiving bank. Amount - This amount will be saved for this participant and used whenever a batch is initiated. If

the amount is always the same, enter it here. If the amount fluctuates you may enter a zero. This amount may be changed before the batch is initiated.

Transaction Type - Dropdown menu: Select the transaction type. This indicates how the participant’s account with be affected by the ACH transaction (e.g., checking deposit, checking withdrawal, savings deposit or savings withdrawal).

Prenote (optional) – A prenote is a designated testing mechanism used when setting up a new participant. It comes through as a special transaction type with a dollar value of $0.00. The purpose of a $0.00 prenote transaction is to verify the bank account information entered is valid. If there is any issue, a notification will be emailed with a description of the issue.

Addenda (optional) – Additional information can be included with each ACH transaction (e.g., pay period or invoice number). This field can be edited before the ACH batch is initiated.

Ending Date (optional) – Leave blank. Click “Add”

Update an Existing Participant Select a participant using the dropdown menu Make any necessary changes To restore all of the fields to their previously saved values, click Reset Click Update to save your changes



Delete a Participant Select a participant using the dropdown menu and click Delete.

A confirmation box will appear. Click Delete to perform the deletion, or click Cancel to keep the participant’s record.



Assign Participant to Batch Use this screen to assign each participant to a specific batch template. Each participant may be assigned to multiple batch templates. Step 3: From the Payments & Transfers menu, select Assign Participant to Batch. This will allow you to assign one or more or remove participants from a specific batch template.

Select the Template Name from the drop down menu. Select the participant by clicking on the Select box next to each Participant ID to assign to the template and click Update.



Initiate Batch Step 4: From the Payments & Transfers menu, select Initiate Batch. This will allow you to review the batch details, make updates and submit your batch.

Select the Template Name from the drop down menu

Changes can be made to the Effective Date, the Amount and/or the Addenda Participants can be excluded from the batch by selecting the box under Hold Click Initiate to start the batch process NOTE: The Save option will save the batch information but it will not initiate/send your batch

template



Approve Batch Step 5: From the Payments & Transfers menu, select Approve/View ACH Activity. This will allow you to review the pending ACH batch and approve it.

The batch details can be reviewed by clicking the magnifying glass icon under Details. If the batch information is correct, select the check box next to the batch pending approval, and click Approve.



The ACH Approval Review pop up window prompts you for the 6-digit token security code. Enter the security code and click Approve.

Once the ACH batch has been approved the status will change to APPROVED. The batch details can be reviewed by clicking the magnifying glass icon under Details.

Send ACH/NACHA File Step 1: From the Payments & Transfers menu, select Send ACH File. This will allow you to process an ACH/NACHA file created from your accounting/payroll software.

Click Browse to select your ACH/NACHA file

Search for your file on your computer and select the file Click Upload The Send ACH File Verification page will display the ACH/NACHA file details If the displayed information is correct, click Submit



Approve ACH/NACHA File Step 2: From the Payments & Transfers menu, select Approve/View ACH Activity. This will allow you to review the pending ACH batch and approve it.

The batch details can be reviewed by clicking the magnifying glass icon under Details. If the batch information is correct, select the check box next to ACH Batches Pending Approval and click Approve.

The ACH Approval Review pop up window prompts you for the 6-digit token security code. Enter the security code and click Approve.



Once the ACH batch has been approved the status will change to APPROVED. The batch details can be reviewed by clicking the magnifying glass icon under Details.

ACH Reference Guide This quick reference guide was developed to give you an overview of important information you should be aware of as an originator of ACH transactions. It is not intended to be a replacement or substitution for the NACHA Rules and Guidelines. NACHA Rules are subject to change.

Facts & Guidelines

ACH Facts An ACH originator is an entity or person who creates an ACH transaction ACH entries are categorized as “consumer” or “corporate” ACH is used to credit or debit checking or savings accounts ACH entries are irrevocable once they have been sent for processing

ACH Legal Framework You are required to abide by multiple rules and agreements including, but not limited to, the following when initiating ACH transactions:

NACHA Operating Rules (www.nacha.org) Regulation E (for consumer entries)

UCC4 (for corporate credits) Heritage Bank ACH Agreement Bank and Corporate Agreements Authorizations from employees, customers, etc.

Your Responsibilities as an Originator Obtain proper authorizations, dependent upon the transaction type, and retain authorizations for

two years past revocation (See “Consumer Debit Authorizations”). Provide a copy of authorization, within 10 days of request by the bank. Give appropriate notice to debtor if changing amount or date. (See “Changing Dates or

Amounts”). Cease subsequent entries when notified. Send entries on the proper date. Make necessary changes to payee account information upon receipt of a Notification of Change

or before another entry is sent. Secure access to physical data to protect the banking information received to

originate transactions.

Cutoff Times Heritage Bank has various ACH pickup times throughout the business day. ACH batches are

picked up at 9 am, 10 am, 2 pm, and 5 pm PST.

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Heritage Bank ACH final cutoff time is 5 pm PST. Any batch submitted after 5 PM PST will not be picked up and processed until 9 am the next banking day.

Batches are picked up Monday through Friday, excluding federal holidays.

Direct Deposit Payroll Authorizations (Consumer) Use a direct deposit authorization form to collect employee account information. This form should

authorize the company to make credit and debit entries in the event a payroll adjustment is necessary.

Obtain a voided check, not a deposit slip, from the employee. The most common SEC code is PPD (used for debits and credits).

Consumer Debit Authorizations For consumers, an authorization to debit an account must be in writing or “similarly

authenticated.”

The most common SEC code is PPD (used for debits and credits).

Corporate Authorizations For companies, there must be an agreement between the two parties. While the NACHA Rules do

not define an “agreement,” Heritage Bank recommends you have the company complete an authorization form.

The most common SEC code is CCD (used for debits and credits).

Changing Date or Amounts of Debits ACH Rules require you to notify your debtors of any changes in date or amount debited under the following circumstances:

7 calendar days’ notice for a change of date (consumer and corporate). 10 calendar days’ notice for a change in amount (consumer only).

Sending the notice via U.S. Mail is acceptable.

Pre-Notifications (Prenotes) Prenotes are zero-dollar entries which precede the first live entry. The purpose of a prenote is to

verify account information. Prenotes are not a requirement. If sent, prenote rules must be followed. A prenote must precede

the first live entry by at least six (6) banking days. The receiving bank is not required to validate the name of the payee on the prenote, although

many do; they are only required to verify the validity of the account number.

Notice of Change When ACH information is incorrect, a Notification of Change (NOC) is sometimes sent by the

receiving bank requesting future entries contain correct information. ACH Rules require you to make the change before another entry is sent.

The receiving bank warrants that the information they provide is correct.

You will be notified electronically of any NOCs through FED EDI. Heritage Bank may pass along any fines received to you for non-compliance.

Common Notification of Change (NOC) Codes – records need to be updated prior to next ACH entry.

Change Code Field(s) Needing Correction C01 Account Number C02 Routing/Transit Number C03 Account Number and Routing/Transit Number C04 Incorrect Individual/Company Name

C05 Transaction Code – Account Type Incorrect C06 Account Number and Transaction Code C07 Account Number AND Routing/Transit Number AND Transaction Code



Returns Standard Entry Class codes (PPD & CCD) determine the time frame allowable for the bank to

return an ACH to the Originator. Consumers have 60 days from the date of the statement the disputed transaction is on to request

the item be returned (If unauthorized). Commercial entries (CCD) can only be disputed through banking channels within 24 hours of the

settlement date of the entry. Heritage Bank recommends you review your account activity daily.

If the receiving bank receives a dispute claiming a debit was unauthorized, the receiving bank must get a signed Written Statement of Unauthorized Debit from the account holder.

An ACH entry may be reinitiated up to two times if the return reason was “NSF or Uncollected Funds.”

A “Stop Payment” return may be re-initiated only if you receive approval from the payee to re-send the item.

It is a violation of ACH Rules to re-initiate the debit entries returned as Unauthorized (R10) or Revoked (R07).

Common Return Entry Codes

Return Code Reason/Description R01 Insufficient Funds – Available balance is not sufficient to cover the dollar amount of

the debit entry.

R02 Account Closed – A previously open account is now closed. R03 No Account/ Unable to Locate – The account number does not correspond to the

individual identified in the entry or a valid account (this can also be because the account type is incorrect).

R04 Invalid Account Number – The account number fails the check digit validation or may contain an incorrect number of digits.

R05 Unauthorized Debit Entry – A business (corporate) debit entry was transmitted to a client’s consumer account and the client had not authorized the entry.

R06 Returned per ODFI’s Request – The ODFI has requested that the RDFI return the entry. R07 Authorization Revoked by Customer – The customer reported to the bank that the

transaction was not authorized. This typically happens with recurring payments which have been cancelled.

R08 Payment Stopped. R09 Uncollected Funds. R10 Customer advises unauthorized. R14 Rep Payee deceased or unable to continue in that capacity. R15 Account Holder Deceased. R16 Account Frozen. R20 Non-Transaction Account – Policies or regulations prohibits or limit activity to the

account indicated.

R29 Corporate Customer Advises Not Authorized.

Deleting an ACH Batch The bank policy is to not amend or delete entries after they have been delivered to us. It is a best practice and recommended that you have a secondary approver to review ACH items before they are submitted to the bank.

Reversals NACHA Rules allows ACH Originators to send a reversal file for an entry to be returned to the receiving institution within 5 banking days of the effective date. Reversals may only be made for the following conditions:

Incorrect dollar amount Incorrect effective date The receiving bank has the right to deny the reversal for any reason. Heritage Bank is not

responsible for Returned Reversals.



The Originator must transmit the reversal file within 5 banking days of the original entry and within 24 hours of the discovering the error.

If a reversing entry must be made, please contact Heritage Bank’s Cash Management Department at (253) 284-2032.

Fraud Prevention Measures Limit user access to ACH Origination System (business online banking).

Use a dedicated computer for your online financial transactions. Do not allow checking email or web browsing.

Enforce segregation of duties: o The same person should not be allowed to create and approve ACH Batch transactions.

Prohibit sharing user logins, passwords or tokens. Monitor all transaction activity on a daily basis. Utilize fraud prevention tools such as:

o ACH Debit Blocks and Filters o Positive Pay

Immediately contact the bank when any suspicious transactions are found.

NACHA File Standards Immediate Origin – 325170835 Immediate Destination – 325170835

Originating DFI – 325170835 Record Length should be exactly 94 bytes Date for File Creation – Calendar Date Date for Descriptive Date – Effective Date

Include Debit Return/Offset Account Required – Yes Balanced Batches Required – Yes

Definitions ACH Credit – Electronic deposit of funds to a personal or corporate account (e.g., Payroll or Vendor Payments) ACH Debit – Electronic withdrawal of funds from a personal or corporate account (e.g., Collecting Payments) Batch Template – Contains the template name, template description, ACH transmission type, ACH ID and the offsetting account. The batch template allows you to define the essential characteristics of the ACH batch. The system allows you to create new templates, and also update or delete existing templates. Participants – The individual or corporation who will be affected by the ACH transaction. The ACH participant’s bank account may be credited or debited by the ACH transaction (e.g., a payroll deposit or a payment for services rendered). The system allows you to add the participant’s bank account information and also update or delete existing participants. Send ACH File – Allows you to process an ACH/NACHA file created from your accounting/payroll software.



Sample Authorization for Direct Deposit (ACH Credit)



Sample Authorization for Direct Payment (ACH Debit)

ACH AUTOMATED CLEARING HOUSE (ACH) PROCEDURES AND ... · ACH PROCEDURES & REFERENCE GUIDE 2...

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