(Note: Screen shots included herein are from NAV 2016, the most current version of Microsoft Dynamics NAV. Electronic payments have been part of NAV for several earlier versions so your screens may look different from those shown here but the setups are largely parallel).
The output of a check writing process is a paper check. That check is routed for signing, matched against source documents, stuffed into an envelope, sealed, stamped and deposited with the postal authorities for delivery to the recipient.
Process time: a minimum of days up to a week or longer depending on a variety of factors including geography of the delivery.
The output of an ACH (electronic payment transaction) is an electronic file. By default, NAV produces that file in NACHA format. NACHA was formerly known as the National Automated Clearing House Association. They governed the ACH network which controls the electronic movement of money and data in the US. This is the parallel way that electronic payments get cleared vis-a-vis paper checks.
Process time: hours to days.
So how does all this really work under the hood? That’s by and large what the NAV setup is designed to accomplish. It provides container fields to store the data that the overall electronic process requires in order to function properly.
The NACHA format represents a standard but there are allowable variations in that standard. Different banks use variations.
In addition to the NACHA standard, NAV also supports the CTX (Corporate Trade Exchange) standard entry class code. The CTX standard deals with the transfer of funds, both debits and credits) between trading partners, e.g. your company and those it trades with.
Both the NACHA and the CTX standard are supported out of the box by NAV. Both of these standards relate to the structure and content of the data files that flow between you, your bank and the third party involved in that transaction.
The starting point is your issuing bank, the one to whom your electronic payment files get transmitted and processed. Your bank can provide you with the details of the file format it will expect you to provide during the process of creating electronic payments. That format may be different from the standard formats supported by NAV. If it is different, it will require some modification of the standard file format supported by NAV. Also note and inquire of your bank to understand what additional fees they may impose for ACH processing. Changing from paper checks to ACH saves some money measured in employee time to print, verify, sign, stuff and mail those checks. Some of that savings can be eaten away by various additional fees that may be imposed by the banks.
Provide the file format supplied to you by your bank to your NAV partner. They can evaluate what changes, if any, may be required to produce the file in a format acceptable to the bank.
One way to think about this process is to imagine a three legged stool. Your company is one of the legs. The bank is another leg. The vendor or parties receiving funds is the other leg. If any one of them fails, the stool will collapse dumping you on the ground.
BANK FILE Information
STEP 1: GET A FILE FROM YOUR BANK SPECIFYING THE FORMAT THEY EXPECT TO RECEIVE.
STEP2: DELIVER THAT FILE TO YOUR NAV BUSINESS PARTNER.
Your business partner can compare the bank file with the standard file produced by NAV and ascertain the extent to which modifications, if any, are required.
All vendors may not want or be able to process ACH transactions. This creates a NAV environment where some part of your vendors are to be paid via ACH and some other part is to be paid via check.
STEP 3: CONTACT EACH VENDOR TO BE PAID BY ACH ELECTRONIC PAYMENTS
Obtain the following information from each:
1. The bank name to receive the ACH.
2. The BANK BRANCH NUMBER
3. The BANK ACCOUNT NUMBER
4. The BANK TRANSIT NUMBER
STEP 4: In NAV, IDENTIFY THE SPECIFIC VENDORS TO RECEIVE ACH ELECTRONIC PAYMENTS
This is normally done by populating the PAYMENT METHOD code on the vendor card, as shown below:
NOTE: You may first have to create the code you use by clicking NEW and populating the necessary fields, as shown below here:
This step identifies the set of vendors who are to be paid via the Electronic Payment method. All others would typically have a payment method code of CHECK.
STEP 5: SETUP THE VENDOR BANK ACCOUNT INFORMATION
This bank account information is to be the bank account INTO WHICH the ACH transfer is to be deposited. If you think about it, this makes perfect sense. Part of your outgoing ACH payment file must identify the vendor and bank account where the transfer is to terminate. The vendor bank account information obtained in step 3 above will now get used.
The minimum required fields on the vendor bank account card include.
· Code (your internal code to ID this bank)
· Bank Name
· Bank Branch Number
· Bank Account Number
· Transit Number
· Use for Electronic Payments – checkbox clicked (YES, or TRUE)
STEP 6: FEDERAL ID ON THE COMPANY INFORMATION CARD
Your Federal ID Number is transmitted as a required part of the ACH file. This information is pulled from the company information card.
BANK Account Setups
STEP 7: COMPLETE THE BANK ACCOUNT CARD (fields and screenshots shown below)
· Bank Name: Included in the electronic payment file
· Last Remittance Advice No. field
· Note: when you export the electronic file in the Payment Journal, the remittance advices report is printed and the number series is advanced.
· Transit Number
· Bank Account Number
· Bank Branch Number
· Export format (choose US normally)
· E-Pay Export File Path: this is the network location where the electronic payment file is temporarily placed.
· The file path MUST end with \
· The user processing Payment Journals MUST have READ/WRITE/DELETE security access to that folder.
· Last E-Pay Export file name
· File name with a numeric last set of digits on the right and file type, for example
o Your bank may require a file in the .txt format. The file name could then be something along the lines of ACH_0001.txt
· E-Pay Transaction Program Path: final placement of the export file before transmitting to the bank
· This is where the user goes to pick up the file to send it to the bank.
· The user processing the payment journal MUST have READWRITE/DELETE security access to this folder.
· The path value entered here MUST end with \
· When the user makes the “Transmit” selection in the payment journal, NAV moves the file OUT of the E-Pay Export folder (see above) and INTO this folder.
· If this field does not shown on the Bank Account Card it needs to be added back as it MUST be populated for this to work.
Please stay tuned for “USING ACH PAYMENTS” – coming soon.