Best Practices for Dealing with an ACH Processing Error

Cachet has put together some best practices for handling an ACH processing problem.

This week, Cachet has been assisting several frantic payroll providers with their ACH processing needs due to an issue with their current provider.  We understand that no company is perfect and sometimes ACH processing errors can occur; being prepared by having a contingency plan can help your staff and your clients in case of emergency. The following are several best practices suggestions that Cachet recommends every payroll provider consider in the event of a problem with their ACH transactions.

Keep the lines of communication open.

This is probably the most difficult item, you will want to respond to each client inquiry immediately but may not have the staff to do so. Make sure to have a method of mass-communicating the most recent information available and assure your clients that you will respond to individual requests as quickly as possible.

Know your ACH provider’s policy for missed transactions.

What are your options and deadlines for your preferred solution? There are usually three options for dealing with a missed or delayed transaction;

• Wait. Your ACH provider likely re-submitted or has already pushed the ACH file through and it will clear the following business day. If you can wait, this is usually the preferred option as it will cause less manual work and is less costly in the long run.
• Run Paper Checks. If you require a same day resolution, run paper checks for all paychecks/direct deposits. Make sure to notify your ACH provider that you are running paper checks so they can stop those transactions from going through.
• Wire Transfer. Another same day resolution is to wire the funds, though wire transfers will require a considerable amount of manual work which you may not have enough time to complete depending on your processor’s wire deadlines. Wires also tend to be the most costly option overall.

Know your clients’ preference.

Keep a record of each client’s preferred resolution in the event of an ACH error on file. It is also a good idea to include legal language in your Employee Direct Deposit Authorizations and/or Client Service Agreements that addresses how a missed transaction or payroll will be handled. Cachet suggests including clauses regarding liability, reversals, and direct deposit timelines for late deposits to your client and employee level agreements. These are suggestions only and should be reviewed by your attorney for your specific needs and situation.

Try to be patient.

Patience is always easier said than done, especially when you have furious clients pounding on your figurative door with questions that you can’t answer. In the event of a missed or delayed ACH transaction, your ACH provider will also be experiencing a higher than normal volume of correspondence and may take some time to respond to your specific inquiry. Be prepared to wait for a response.

Understand your clients’ frustration.

While your ACH processor, their employee(s), their bank, or whomever may have been the root cause of the issue, your clients’ relationship is with you and you alone. They will expect you to have all of the answers and unfortunately you may not have the information they want, do your best to provide all of the information that you do have, explain their options, and listen to their frustrations. Sometimes a sympathetic ear can go a long way.
Cachet has a history of assisting clients who have encountered issues with their current ACH processors. With expedited implementation options and wire services, Cachet offers payroll providers the ability to continue offering direct deposit services for their clients even during uncertain times with their existing ACH provider. Our annual SSAE 16 and financial audits ensure that we adhere to strict internal operational standards, while our $50 million dollar crime bond adds an additional layer of protection for our client’s payroll transactions.

The "Fiscal Cliff" And What it Means For Our Clients

With less than two weeks before the New Year, the White House and House Republicans are still in negotiations on how to avoid the “fiscal cliff” that is set to begin January 1, 2013. The “fiscal cliff” has been a top news story since before the election but what does it mean for your business?

The delays in negotiations pose potential problems for all taxpayers, especially businesses that rely on and create payroll software. The dozens of expected exemptions, deductions, exclusions and changes to the various payroll tax codes/rates make it nearly impossible to begin preparing for the 2013 payroll tax year. Many payroll software companies are gearing up to make quick changes to their payroll software modules as their users grow anxious that there won’t be enough time to implement all of the changes prior to the first 2013 check dates.  Cachet and PTM are taking steps to ensure that our clients will have the smoothest transition into the New Year as possible.

In the past, PTM has dealt with servicing clients whose payroll software companies did not have adequate time to update their systems, specifically with items effecting first quarter payrolls, much like the expected changes to prevent our country from going over the “fiscal cliff.”  PTM is prepared to implement a temporary “workaround” to process data accurately as we receive it from our payroll software vendor partners up to and after the eleventh hour; while Cachet is poised to handle any changes to client processing volume that may occur as a result of the changes. We will be doing as much as we can to help our clients and payroll software vendor partners manage the pending changes. 

With the current fiscal uncertainty and pending political negotiations, rest assured that Cachet and PTM will be up-to-date and serve our clients in the best way possible as the December 31^st deadline approaches.

For Year End updates and other industry information connect with us:

IRS/Tax Agency Communication

Communicating with the Internal Service Revenue (IRS) seems impossible, given the fact that they are responsible for tax collection from all individuals and businesses in the United States.  When it comes to communicating with the IRS, it is important that you go through the proper channels to receive the most relevant information possible.

Businesses that outsource their payroll tax processing to a full-service provider, don’t have to worry because their payroll tax processor holds Power of Attorney (POA) and can deal directly with the IRS on their behalf.  However, businesses with a more flexible payroll service or those who process their payroll taxes in-house hold the responsibility to communicate with the IRS should an error occur with their taxes.

Here are a few tips to make communicating with IRS a more painless task:

• Have your Information Ready. Make sure you have all of the pertinent information (POA, Inquiry notice, FEIN) before you contact the IRS, they will make you call back if you can't locate the information, which no one wants. 
• Don't Delay. When it comes to handling matters with the IRS, respond quickly.  The sooner you address an inquiry the less you will have to pay in penalties and interest.
• Clear your Calendar. Since the IRS deals with all US businesses and citizens it can take up to or over an hour to reach the appropriate party.  Having a stress ball handy may not be a bad idea…
• The Later the Better. PTM Compliance Specialist, Vivian Leidelmeijer, one of PTM’s main correspondents with the IRS, shared an insight she has learned over her years of communicating with the IRS.  She stated that if you call the IRS later in the afternoon, there is generally a shorter waiting time and the employees are more eager to help you quickly.  This may be due to the fact that they want to get home by the end of the day, but either way, it’s effective!

If you have any further questions regarding IRS communication, year-end taxes, etc., Cachet and PTM would be happy to answer any questions.  Post questions on Facebook or Twitter, or email us at info@cachetbanq.com.  There are limitless ways to have your questions answered, and Cachet Banq, Inc. and Payroll Tax Management are here to help!

Risk Management for Business: Tips 9 and 10

To end the Risk Management Tips for the week, the focus is on transaction times and deadlines for both collections and deposits, and procedures set in place for competitive services offered. 

Tip 9: Expand time between collection and deposit transactions. You should consider the benefits your company would have if you processed payroll on Monday for a Friday check date. You will collect from the client on Tuesday and by Thursday you’ll find out if there is an NSF.

Tip 10: Establish procedures for next-day and same-day payrolls. To stay competitive, you need to be in a position to offer next-day and same-day processing. Consider requiring these clients to wire funds to you. If your ACH processor has the capability, DrawDown FedWire (reverse wire) may also be a good choice.

Additionally, make sure you are reconciling your accounts, especially your tax impound account, down to the FEIN (client) level, on a daily basis.

 
*Bonus Tip: Consider contracting a risk management expert. You can limit your risk by contracting with a trusted partner, allowing you to focus on your core product -- payroll. A service like PTM's FlexTax, gives you the control you desire in an in-house tax processing system, but with all the checks and balances you get with traditional payroll tax outsourcing solutions.

Whichever way you go, make sure you establish risk management policies, and that you review and revise them no less frequently than annually. Make it a point to read articles on industry trends and adjust your business policies as needed.

Connect with us for up-to-date expert information about the 

Payroll industry and our company products/services.

     

Risk Management for Business: Tips 6 - 8

To continue with our Risk Management topic for the week, these tips discuss safety steps you can take before accepting a client as well as procedures and the capacity of your tax software.

Tip 6: Know Your Client. You should consider steps to ensure you do not take on any "clients" that are fraudulent companies, "payroll jumpers", or companies that are financially unstable. Consider running credit checks on new clients, visiting their offices, calling to obtain references from other vendors with which they process, calling their former payroll service bureau, etc.  And don’t forget to do background checks on corporate officers.

Tip 7: Establish procedures for client NSFs. Your procedures should help ensure that you recover the funds as soon as possible. The procedures should include escalating NSF fees, procedures for holding or reversing payroll tax deposits, procedures on when to terminate a client for NSF activity, etc. Follow your procedures to the letter and don't fall into the "he's good for it" trap. Do not let your clients put your business at risk by soliciting unsecured loans!

Tip 8: Consider the capabilities of your tax compliance software. You may be able to offset risk by holding payroll tax deposits in the event of a client NSF. It is important to know the capabilities of your system in order to set your risk management policies. Does your system automatically track $100k payrolls? Does your system allow you to place clients on hold for NSFs? Does your system automatically hold payroll tax deposits if funds have not been received?

Once you have taken into consideration all factors that will contribute to your potential risk and your ability to control it, you need to establish written guidelines that are published, known and practiced by all employees.

Check back every day this week for more helpful tips regarding Risk Management that could potentially save your company a lot of time, money, and stress.

Connect with us for up-to-date expert information about the

Payroll industry and our company's products/services.

Risk Management for Business: Tips 3 - 5

We are continuing our Risk Management tips this week, which focus on common issues that businesses encounter when dealing with clients, NSFs, and cases of potential fraud.  Today the primary focuses are ACH providers and the responsibilities your employees have that can increase the risk of fraud for your company. 

Tip 3: Provide ACH options for all clients without comprising your risk exposure.  The most important way to reduce risk exposure is to secure funds to avoid fraudulent payrolls. Here are some recommendations that we provide to our clients:

·         Direct Wire or DrawDown® Fedwire allows you to offer Direct Deposit to high-risk clients. It eliminates client-funding risk entirely.

o        DrawDown® Fedwire – Puts the payroll provider in control.

o        Direct Wire – Client initiates wire for collection funds.  Payroll provider controls release/suspension of direct deposit transactions

With Cachet’s online system, you can stop the direct deposit transactions on Thursday and prevent them from going to the employees, eliminating the possibility of another set of NSFs.  

Tip 4: Separate your employees’ ACH responsibilities.  Separating the various ACH duties within your company to different employees can reduce your overall risk exposure from internal errors, preventing additional penalties and/or fees.  Can reduce potential ACH errors and/or missing ACH files.

Tip 5: Include proper legal verbiage.  Do you include the appropriate legal verbiage in your client service agreements?  Stating who is ultimately liable for the payroll funds in the event of unfunded ACH funds in your service agreement will also assist in establishing limits to your clients and enforcing those rules on an ongoing basis. This may ultimately reduce your NSFs. This will also protect your company against potential legal battles, should your client “skip town” or avoid funding their payroll(s).

Check back every day this week for more helpful tips regarding Risk Management that could potentially save your company a lot of time, money, and stress.

Connect with us for up-to-date expert information about the 

Payroll industry and our company products/services.

     

Risk Management for Business: Tips 1 and 2

A Cachet and PTM Remarketer recently alerted us to an incidence of attempted fraud.  Fortunately, they had strong risk management procedures in place and were able to handle the situation without any financial restitution needed. 

In light of this, our topic this week is Risk Management and the different measures that a company can implement in order to establish procedures for various payroll processes, protect themselves from NSFs, reconciliation tips, etc.  We will be posting ten tips throughout the week so be sure to check back every day to see every helpful guideline.

Every business model will differ slightly, even in our tight-knit industry. First, think about some key factors related to risk.

Tip 1: Consider your niche market. The first step in creating Risk Management guidelines for your company is to assess your potential risk. Do you specialize in a certain sector of the market, such as restaurant payrolls? You need to understand the potential risk of any niche market in which you specialize. Restaurants are notoriously bad at cash-flow management and far more likely to NSF. Understanding your potential risk as it relates to your niche market will help you create a plan that works for your business.
Tip 2: Consider the policies of your bank or ACH processor. Timing is of the essence when it comes to items that put your business at risk. Look at your bank or ACH processor's policies... How soon are they notifying you of a client NSF? Do they give you the ability to suspend or reverse files? You will need to tailor your risk management policies accordingly.

*Check back every day this week for more helpful tips regarding Risk Management that could potentially save your company a lot of time, money, and stress.

Connect with us for up-to-date expert information about the

Payroll industry and our company's products/services.

 

How to Create Risk Management Guidelines for your Business

Written by: Summer E. Poletti, Cachet Director of Client Relations

With recent IRS legislation now holding third party processors personally accountable for remittance of clients’ payroll tax dollars, establishing and maintaining proper risk management policies is now more important than ever. For details, see our previous blog post blog.payrolltaxmgmt.com/blog/83dfa1bb-f52f-4415-8574-3e60d79a94c0/third-party-payers-could-hold-liability-tfrp-for-non-payment-of-payroll-taxes

Every business model will differ slightly even in our tight-knit industry. First, think about some key factors related to risk.

Consider your niche market. The first step in creating Risk Management guidelines for your company is to assess your potential risk. Do you specialize in a certain sector of the market, such as restaurant payrolls? You need to understand the potential risk of any niche market in which you specialize. Restaurants are notoriously bad at cash-flow management and far more likely to NSF. Understanding your potential risk as it relates to your niche market will help you create a plan that works for your business.

Consider your "selling factor". You already know what sets you apart from the "Big Box" payroll processors; think about how your marketing techniques may affect your potential risk. Do you allow many of your clients to process next-day or same-day payrolls? If so, that is much riskier than processing most of your clients' payrolls two or three days prior to check date.

Consider the policies of your bank or ACH processor.  Timing is of the essence when it comes to items that put your business at risk. Look at your bank or ACH processor's policies and tailor your risk management policies accordingly -- How soon are they notifying you of a client NSF? Do they give you the ability to suspend or reverse files?

Consider the capabilities of your tax compliance software. You may be able to offset risk by holding payroll tax deposits in the event of a client NSF. It is important to know the capabilities of your system in order to set your risk management policies. Does your system automatically track $100k payrolls? Does your system allow you to place clients on hold for NSFs? Does your system automatically hold payroll tax deposits if funds have not been received?

Once you have taken into consideration all factors that will contribute to your potential risk and your ability to control it; you need to establish written guidelines that are published, known, and practiced by all employees.

Know Your Client. You should consider steps to ensure you do not take on any "clients" tat are fraudulent companies, "payroll jumpers", or companies that are financially unstable. Consider running credit checks on new clients, visiting their offices, calling to obtain references from other vendors with which they process, calling their former payroll service bureau, etc.

Establish procedures for next-day and same-day payrolls. To stay competitive, you need to be in a position to offer next-day and same-day processing. Consider requiring these clients to wire funds to you. If your ACH processor has the capability, Drawdown FedWire (reverse wire) may also be a good choice.

Establish procedures for client NSFs. Your procedures should help ensure that you recover the funds as soon as possible. The procedures should include escalating NSF fees, procedures for holding or reversing payroll tax deposits, procedures on when to terminate a client for NSF activity, etc. Follow your procedures to the letter and don't fall into the "he's good for it" trap. Do not let your clients put your business at risk by soliciting unsecured loans!

Reconcile Daily. Make sure you are reconciling your accounts, especially your tax impound account, down to the FEIN (client) level, on a daily basis.

Consider contracting a risk management expert. You can limit your risk by contracting with a trusted partner, allowing you to focus on your core product -- payroll. A service like PTM's FlexTax, gives you the control you desire in an in-house tax processing system, but with all the checks and balances you get with traditional payroll tax outsourcing solutions.

Whichever way you go, make sure you establish risk management policies, and that you review and revise them no less frequently than annually. Make it a point to read articles on industry trends and adjust your business policies as needed.

Watch Your Back(up)

Written by: Cachet IT Department

Every company should employ some type of backup system no matter how small or large they are… but the question is what type of backup is best? Before we get into that, we need to understand what “backing up” means.

There are several reasons to backup:

1. Keeping copies of important data and information
2. Providing redundancy in case of system failures
3. Disaster recovery to allowed continued operation of services.

In addition to the whys, there are also several levels of backup:

1. Archiving a copy of documents and files
2. Backing up databases and programs
3. Backing up user systems and even the entire network.
4. Onsite replacement hardware such as computers, servers and hard disks in case of failures
5. Backup power supplies
6. Backup broadband lines because many businesses rely on internet and email

And within each of these storage based backup levels; there are also several methods to do so:

1. The oldest standard is physical media, backing up to either tape, CDs or DVDs (in the past, used to be floppy disks for anyone old enough to remember those)
2. External hard drives for instant access to data for restore or recovery.
3. Online backup (usually paired with “cloud” services)
4. Real-time replication (similar to online backup but creating an actual mirror copy of a database/system that can be activated and put into use in case the primary system fails)

We believe the best method is to employ a combination of these backup procedures depending on what kind of data and systems are being backed up.

• We use onsite back to multiple file servers, hard drives and physical media for documents, files and emails.
• We use high-speed tape backup that is stored offsite for all system data, databases and programs. Those backup procedures run during off hours.
• We use real-time replication to an out-of-state server facility for disaster recovery.
• We have a backup email system in case our email server goes down.
• We have duplicate hardware of all our critical systems to ensure rapid replacement if a failure occurs.
• We have a backup phone system in case of power outage in our primary facility.
• We have multiple backup broadband lines to our primary broadband line

While implementing many of these protocols could be expensive and time-consuming, we can tell you that we have had to use several of these backup systems at least once. Some of them were put into place because we recognized the need for them based on past experiences and we are always looking to improve our backup procedures.

It’s always better to prepare for such contingencies than having to deal with them when they happen… so whatever method you use, at least do as much as you can.

And backups aren’t just for hardware, systems and data… there is a component that is just as important for your business, personnel and procedures backup. We’ll cover that in a future blog entry.

7 Tips for Safe Social Networking

Written by: Jill Henderson, Cachet Marketing Manager

People, particularly parents, are well aware of the dangers of social networking in terms of personal attacks but with Social Networking becoming more and more prevalent in both our business and personal lives, its more important than ever to protect yourself against all types of cyber criminals. The following tips are great ways to minimize your risk exposure online:

1. Password protection - Use a different password for social networking sites then you do for your email and financial accounts. Also, change your passwords frequently and do not use names or numbers (such as birthdays) within your passwords that are publicly posted on your social networking profiles.
2. Following and Friending - Be selective in who you connect to. Connecting with strangers on social networks is absolutely unnecessary in a personal arena but in business making contacts and expanding your referral network is important. Consider only connecting with people you know, friends of friends/colleagues, people who work within your same industry or who share similar hobbies. Anyone can misrepresent themselves online but being selective about who you connect to can help limit the threats to your accounts and personal information.
3. Links - Don't click on suspicious status updates, articles or links. If your Great Uncle who only listens to Frank and the rest of the Rat Pack, starts tweeting about Justin Beiber... he's probably been hacked, don't perpetuate the security breach by clicking and risking your accounts as well.
4. Oops! I Clicked - If you must (or accidentally) click on your "Great Uncle's" Justin Beiber tweet and it takes you to another page asking for personal information or passwords, do not provide the information!
5. Privacy Settings - Make sure that you set your privacy settings when creating your social networking profiles and update them regularly. Social media sites are constantly adding and changing security and sharing features, checking your settings regularly will allow you to share or hide personal information at a level that is comfortable for you.
6. Security Software - Make sure the security software on your computer and handheld devices is up to date.
7. Checking In - Publicly posting your location or weekend/vacation plans can open you or your home up to criminal attacks. If you're going on vacation and you are excited to tell your friends and family all about it, consider waiting until you return from your vacation or limit the people who can see that particular post... otherwise you could arrive home to an empty house. Do you have a "crazy" ex that you want to stay away from? Checking In around town lets them know where you are; if you don't want people to find you, don't tell them where you are.

Email Security and Phishing

Written by: Nixon Adoyo, PTM Tax Client Services Manager

Phishing perpetrators continue unrelenting assault on businesses in a bid to illegally gain access to extract data from companies so they can further their criminal activities. The Payroll Service Industry seems to be dealing with a new barrage of attacks that have continuously evolved and progressed in sophistication in an attempt to fool unsuspecting organizations into granting access to vital data.

Attackers seem to be stepping outside known “bait” methods or email formats that could easily be identified and flagged by using email addresses and domain names that mimic known and respected organizations like the IRS, NACHA, BBB and even USPS.

Earlier this year, the Electronic Payments Association received reports that companies and individuals were receiving fraudulent emails that appeared to have been sent from National Automated Clearing House Association (NACHA). Reported emails were sent to unsuspecting individuals and organizations advising of electronic payments that had been rejected, flagged or blocked by the Clearing House Association.

Instructions in these emails advised recipients to open attachments for more details on mentioned blocked transactions. Once the email or attachments were opened, Malware attached to the emails infected victims systems successfully completing intended task.

National Automated Clearing House Association (NACHA) released an alert in March 2011 advising organizations of the phishing emails in an excerpt taken from their website citing, they were aware of emails varying in content that appeared to be transmitted from email addresses associated with the NACHA domain (@nacha.org). These emails later began listing addresses with fictitious names of NACHA employees and or departments as shown in this example. (jdoe@nacha.org)

The notification went on to clarify that NACHA itself does not process or touch ACH transactions that flow to and from organizations and financial institutions. NACHA also does not send communications to persons or organizations about individual ACH transactions that they originate or receive. While Payroll Tax Management notified clients about these emails, complete details are available on NACHA's website.

The Internal Revenue Service and the Federal Deposit Insurance Corporation have also released publications on their websites about phishing emails created to seem like they come from their domains and have detailed nature of emails and how to identify, contain and report problem.

So far names of the following organizations have been used in these phishing scams.

• BBB - Better Business Bureau
• FDIC - Federal Deposit Insurance Corporation
• IRS - Internal Revenue Service
• NACHA - National Automated Clearing House Association
• USPS - United States Postal Service

To protect our internal assets and client data, Payroll Tax Management (PTM) employs security software programs to monitor its system and to identify unauthorized attempts to upload or alter information. Emails procedures and training is done to equip employees with the ability to identify phishing emails. The importance of training is making everyone aware of these ever evolving phishing attacks along with better understanding of how all organizations we transact with communicate. With this knowledge it becomes that much easier for everyone to help flag suspect communication methods.

Payroll Tax Management has also implemented policies and procedures that have helped identify emails that may not have been flagged as spam but appear suspect. Continuous education and communication to employees has helped defeat these attacks. Employees are constantly aware that suspect emails with attachments and/or links to Web pages host malicious code and software. For this reason, they do not open attachments or follow Web links in unsolicited emails from unknown parties or from parties with whom they do not normally communicate.

Forwarded emails from known parties that seem suspicious or otherwise unusual are also handled the same way and verification of the messages is done first by contacting sending party by phone before actually opening. Learning about organizations that handle our transactions and their methods of communication also helps identify these fraudulent emails. The IRS and other prominent organization like NACHA or FDIC state they do not send or solicit information by email.
We hope this information helps our clients and partners protect their systems from these attacks.