Payroll Direct Deposit Processing

Payroll Direct Deposit Through Your Bank

Logic Forte is able to help our customers who process payroll in-house keep your payroll costs down by generating custom ACH formatted data files that you upload directly to your bank so that your bank can process your direct deposits. We have been providing custom ACH payroll direct deposit solutions to our customers for over a decade.

Example: It is common for some payroll software and services to charge $0.50 to $1.00 per employee for electronic direct deposit services. A customer with 400+ employees would be paying $400-800/month for direct deposit (800 transactions/month at $0.50 to $1.00 each). By processing Direct Deposits through your bank, the customer might only pay $50-100/month for access to their bank's ACH services.

Direct Deposit Workflow

1. Logic Forte collects payroll data from the Point of Sale (POS) at each of your locations on a daily basis. If you rely on a separate HR information system, we can collect employee records from that system.
2. You access the Logic Forte web portal to review your payroll data status across all of your locations and download a payroll data file that is designed for your payroll system. The file contains employee records and time clock data.
3. You import the Logic Forte payroll data file into your existing payroll system. This will add/update employee records and add time clock records including wage information, tips, overtime, etc.
4. You process your payroll using your existing payroll software. Your payroll software assists you with tax withholdings, benefit withholdings, garnishments, and any other required withholdings.
5. You export the payroll results from your payroll system, and uploads the payroll results to Logic Forte.
6. Logic Forte prepares a custom ACH Direct Deposit file (NACHA format) that is ready for upload to your bank. The file includes transactions that instruct the bank to transfer funds from each store checking account into the customer's central payroll account. If necessary, the file can also include transactions that instruct the bank to transfer Direct Deposits from the customer's payroll account to each employee. The file also includes ACH verification requests for any employees who recently enrolled or updated their ACH Direct Deposit bank information.
7. You download the ACH Direct Deposit file from Logic Forte and uploads the file to the bank.
8. The bank collects funds from each of your accounts (if you do not have a Cash Management account), sends a Direct Deposit payment to each of your employees, and verifies any new/updated bank accounts for us.

Schedule

For this payroll workflow to be successful, the customer must pay close attention to multiple payroll deadlines:

1. Payroll Deadline - Logic Forte must receive your payroll results by this date (e.g. Net Pay).
2. ACH Deadline - Your bank must receive your ACH file by this date.
3. Pay Date - Your employees will receive their ACH Direct Deposit on this date.

The sample schedule below is a semi-monthly (twice per month) payroll schedule ending on the 15th/last days of the month and paying employees on the 20th/5th day of the month (or prior business day).

The sample schedule above assumes your bank allows you to upload the ACH file with a next day effective date.

For example, if you upload your ACH transactions on Monday, the transactions would settle on Tuesday, assuming both days are business days.

The sample schedule also makes the following assumptions:

1. You already have a central "Cash Management" account, or
2. Your bank allows you to transfer funds from external bank accounts into your payroll account AND allows you to transfer funds out of your payroll account to your employees on the SAME DAY.

What is a Cash Management Account?

Businesses with many restaurant or retail locations often establish accounts at banks near each of those retail locations so that their employees can take cash deposits to the nearby bank throughout the day. It is uncommon for a single bank to have branches conveniently located near each location, so most businesses end up with bank accounts at multiple banks. It is common practice for a business to maintain a separate bank account for each location, and to "sweep" funds from each of these accounts across multiple banks into a central "Cash Management" account at the primary bank on a daily or weekly basis, so that all business expenses can be paid from the central account.

Customers and their CPAs often rely on the electronic cash deposit data they receive from Logic Forte to determine how many funds to transfer from each account, rather than logging into each individual bank to check account balances.

Some armored truck cash pickup services will deposit your cash into a central account that could be considered a Cash Management account.

Alternatives to a Cash Management Account

If your business does not maintain a central Cash Management account and you have been issuing payroll checks from multiple accounts and/or multiple banks, you should plan to transfer funds from these various accounts/banks into a single payroll account at the bank you use to process your ACH Direct Deposits. Based on our experience, consolidating your cash into a single/central account is much easier than managing ACH payments through multiple banks.

Logic Forte can customize your ACH data file to manage these transfers. For example, if a location pays 10 people $1,000 each, we would include an 11th transaction that instructs your bank to transfer $10,000 from the location's checking account into your payroll account so that you do not have to manually mange the transfer.

Your bank will normally require your business establish a line of credit if you are transferring funds from external bank accounts into your payroll account on the same day you are transferring direct deposit funds to your employees. Some banks will NOT allow these same day transfers, and will instead require the incoming transfers settle 2-3 days before the outgoing transfers. These type of policies vary from bank to bank, so it may be worth finding a bank that does allow these same day credit and debit transactions.

Schedule Concerns

If you have a semi-monthly (twice per month) payroll schedule ending on the 15th/last days of the month and paying employees on the 20th/5th day of the month (or prior business day), you will encounter several pay periods per year where you must complete processing of your payroll and upload the ACH file to your bank the first business day after the pay period has ended. See yellow highlighted lines on the sample payroll schedule. This is a result of weekends and bank holidays.

Example: US Independence Day (July 4th 2020) is observed on Friday July 3rd 2020. Since the scheduled Pay Date is Sunday July 5th 2020 and employees expect to be paid on or BEFORE that date, the ACH file must be uploaded (ACH Deadline) on Wednesday July 1st 2020 and effective (Pay Date) on Thursday July 2nd 2020.

If you are not comfortable with such a small window for processing your payroll, consider extending your pay dates to the 6th and 21st, or consider changing from "pay on the pay date or PRIOR business date" to "pay on the pay date or NEXT business day".

In the example above, the Pay Date Sunday July 5th 2020 could be paid on the next business day (Monday July 6th 2020) instead of prior business day (Thursday July 2nd 2020).

Summary

If your Sonic Drive-In franchise group is processing payroll in-house and you are searching for low cost direct deposit payroll options, we may be able to help you leverage existing low cost ACH processing services at your existing bank by generating ACH Direct Deposit that your bank can use to process your employee direct deposits.

Be wary of extremely short payroll deadlines. Pay dates that are only 5 calendar days after the payroll period ends tend to result in several same day deadlines at least 1-2 times each year due to holidays. Consider extending the pay date to 6 calendar days after the period ends OR consider changing your policy so that pay dates that fall on a weekend or holiday are paid on the following business day, instead of the prior business day.

Contact Us

Contact Us if you would like to learn more about adding our ACH Direct Deposits to your service. We are glad to have a conversation with your bank to help you determine costs associated with having them process your payroll.

If you are not an existing Logic Forte customer and you are looking for ACH advice related to a project, contact us to discuss consulting for your ACH project at an hourly rate.