Are You Doing the Most for Your Business Customers?

By Matthew Helfrich and Shirley Hopkins, EFT Strategy Division

By March 1, 2013, all federal recipients are required to receive payments by electronic funds transfer (EFT), in accordance with the Department of Treasury's final rule issued on Dec. 22, 2010. Although there are waivers available for individual federal government recipients in unique, limited circumstances, there are no waivers available for vendors. As a result, a large volume of federal government vendors will be switching from check to EFT to meet this requirement.

Financial institutions play an important role in the implementation of the EFT requirement for vendor payments. Companies receiving electronic payments from the federal government need remittance data (payment-related data), most notably an invoice number or contract number, in order to properly reconcile these payments against outstanding invoices in their accounts receivable systems. Without adequate payment-related information, it is difficult and time-consuming for vendors to properly complete their accounting. This is one of the primary reasons vendors are reluctant to receive payments electronically. As a result, the National Automated Clearing House Association (NACHA) amended its rules on the Automated Clearinghouse (ACH) system in 1998 to require that financial institutions provide remittance information to their business customers upon request.

Federal government agencies must use specific electronic payment formats to pass along payment-related information to vendors and their respective financial institutions. Fortunately, Treasury's Financial Management Service (FMS) supports the ACH payment formats that provide remittance data to federal agency vendors to help them account for the payments they receive. Specifically, FMS supports:

• Cash Concentration and Deposit (CCD) Plus - a corporate transaction that allows federal agencies to include one addenda record with each payment it processes through Treasury. Agencies can include payment details in the addenda record that allow the vendor to identify and reconcile the payment.
  
  
• Corporate Trade Exchange (CTX) - a corporate transaction that allows an agency to include up to 9,999 addenda records with each payment. This format is especially useful for agencies receiving numerous invoices from one vendor, in which they can use the CTX format to reimburse the vendor with one lump payment while using the multiple addenda records to allow the vendor to reconcile the outstanding invoices.
  
  

Treasury's EFT requirement, NACHA's 1998 Rules on remittance data delivery, and the federal government's use of ACH formats (that include remittance information), provide both a regulatory and operational foundation to ensure vendors receive payments electronically. Nonetheless, this important foundation proves meaningless unless financial institutions pass this remittance data to their business customers upon request and in a readable form. Here's an important checklist developed to help your financial institution.

1. Train staff on the NACHA rules requiring the delivery of remittance data to business customers. Be sure they know how these reports can be generated, emailed, and/or printed for the business customer in a timely manner.
   
   
2. Discuss remittance data reporting capabilities with your business customers. Ensure that customer needs are met and that the customer is fully aware of the process to request this information from the institution, including a primary point of contact and/or instructions and credentials to access the information online.
   
   
3. Ensure software capable of processing remittance data for your customers is available. Also, that the systems or products owned are not difficult to utilize. There are several remittance software products currently available in the market to help financial institutions translate addenda information for their business customers, including software designed by the Federal Reserve Bank.
   
   
4. Contact the local ACH association for assistance, if you experience problems locating a remittance software solution.
   
   
5. Be proactive in supporting the Treasury EFT requirement. Ensure that your business customers receive adequate remittance data to perform their daily accounting functions.
   
   

As implementation of the Treasury EFT rule continues, many of your customers will be expecting to receive necessary payment information in a timely manner. Working closely with your customers to ensure they receive ample remittance in a timely manner not only supports the Treasury EFT requirement, but also allows you to enhance your services and develop stronger relationships with your business customers.

If you have any questions about Treasury's EFT rule and/or remittance data solutions, please visit www.fms.treas.gov/vendor.html or call 202-874-6619.