What’s small business direct deposit for payroll?
Direct deposit is the electronic form of a paycheck—the electronic transfer of money from your business bank account to your employee’s bank account. Once set up, the direct deposit process ensures that each payday, your employee’s bank will credit the employee’s account and debit yours.
The advantages of using direct deposit for small business
For your business:
- Saves time every payroll period through an automated process
- Simplifies your payroll process with templates for setting up recurring direct deposit payments
- Saves you money with no need to print, mail, or request stop payments on checks
- Helps you avoid the risk of checks getting lost or stolen, plus you can set up controls to authorize payments before they’re sent
For your employees:
- Saves the time of waiting for a check in the mail and making a trip to the bank
- Keeps them from carrying cash or checks that can be stolen or lost
- Offers the financial security of a predictable schedule of when funds will be deposited and be made available by the employee’s bank
Approximately 94% of U.S. employees receive their paychecks through direct deposit.1
Common steps to setting up direct deposit payments
1. Select a direct deposit provider. You can either set up direct deposit through your business bank or use a payroll software with direct deposit functionality.
2. Register, enroll or implement the direct deposit process. You’ll need to work with your business bank or payroll service provider to verify the payment process, or verification may be included in your stand-alone payroll software.
3. Obtain your employees’ bank account information and written authorization. You will then submit this information to your business bank via file transmission or website, or through your payroll service.
4. Create your payroll payment schedule. Be sure to set your payment schedule based on your business cash flow and factor in how much time your bank or payroll provider needs to complete the deposits. Once set, communicate the schedule to your employees and administrators.
5. Run payroll. Once you’ve verified that the process and schedule are correct, you can start running payroll. Your employees will receive their paychecks through direct deposit.
The costs of payroll direct deposit
So how much does small business direct deposit cost? It depends on how much of the process you want to outsource and who you choose as your payroll provider. That includes whether you select a bank, credit union, or payroll software system. Financial institutions charge a fee to manage the process for you, while software options often have direct deposit included in the initial price.
Also, how much direct involvement you want to have in payroll? That can impact what you want to pay for. Software platforms offer additional functionality to automate the work, and many financial institutions offer a level of service that makes the process virtually hands-free.
Make the best choice for your business.
The benefits of direct deposit to your employees and your business are clear. Employees only need to provide a little information to have money deposited right into their bank accounts. As a business owner, you’ll spend less time and money on processing payroll. And more time focusing on your business.