EFT, or Electronic Funds Transfer is a process where companies typically will pay their accounts payable invoices via an online banking format, also known as NACHA. It is done through SAP Business One with a 5 step wizard. You select the vendors and the invoices that you want to pay and EFT creates all of the payment information and subsequently an electronic file that the user uploads on a secure FTP site at the bank location. It eliminates the need to write checks, print checks, put checks into an envelope, mail checks, and then wait for them to clear.
It can also be used on the Accounts Receivable side as well, assuming your customer has an ACH (American Clearing House) tool. But primarily it is used on your Accounts Payable side, when you’re trying to pay people or organizations for invoices.
So in a normal, check-printing environment, what you would do is to go out and select the invoices you want to pay, print a report and put it on your supervisor’s desk for them to check which to pay and which to not pay. After that, go off and select which ones you want to print, print them, line them up, put them back on the supervisor’s desk for a signature, get them signed, stuff in an envelope, and mail it with a copy of the invoice.
Needless to say, a long process. ACH eliminates that whole process, making the approval process electronic, meaning internal from SAP and eliminating the need to print checks and reports. Once the invoices are approved to be paid off, you simply follow the wizard in EFT which then creates a bank file. You go to the FTP site for the bank and upload the remittance copy. You can also send off a remittance copy to the vendor stating what invoice you’re paying, what the amount is, and telling them to expect it deposited in their account within 48 hours.
The real pain EFT resolves is the whole process of getting the manual approval to get an invoice paid, printing checks, having them signed, stuffing envelopes, putting on postage, and mailing them with a copy of the invoice attached.
Canada had a Postal Service Strike this past spring and summer. It was a nightmare for them because instead of spending $.75 to mail something, they were paying a courier which is about ten times more expensive than it is to send an envelope to your vendor to pay an invoice. Using EFT would eliminate this situation, and going paperless would avoid any future problems.