What is an EFT?
Also known as an Electronic Funds Transfer, an EFT forgoes paper money through administering financial transactions between two parties via electronic signals. An EFT gives the user easy access to financial information but more importantly can facilitate financial transactions at a lightning pace without the requirement of physical tangible information that can be tedious to process, enabling a less efficient method of processing vital financial information that can’t keep up with the fast-paced growth of your business.
Essentially an EFT payment is any Etype of electronic transaction that doesn’t use the bank as a direct intermediary but gives you the essential ability to transfer from one account to another.
However, EFT’s payments are widely popular in B2B transactions, this can be through payroll, wire transfers, and ACH’s (Automated Clearing House, a computerised network for processing low-value domestic payments).
A Brief History of EFT’s
While transferring funds were a usual aspect of business transactions during much of the 19th century through the use of telegraphs, EFTs were introduced in 1871 by Western Union.
However, EFT’s started to take off during the 1960s but with the introduction of ATM’s as a method of withdrawing funds EFT’s started to garner major traction towards becoming incredibly commercially viable
In today’s world, EFT’s run almost most commercial transactions from daily coffee purchases to salaries, wire transfers, card transactions to large inventory purchases for the business, the possibilities with the advent of EFT’s are quite transformational and endless for the global economy simply due to its ease of use, accessibility and speed compared to manually handling funds for various purposes be it for purchases or deposits.
3 Major Reasons why you should use EFTs’ as part of your ERP Solution
Electronic Fund Transfers are available from any part of the world, with retailers giving an incredible amount of payment options online that not only make payments and transfers from the comfort of your own home but also give you the ability to now even pay at a weekly rate on interest-free periodic loans.
Money can be accessed internationally as well with global transactions and money is received in the currency you prefer provided you have the necessary bank account in that currency.
Moreover, from a business perspective apart from offering your customers a myriad of payment options, you are also able to automate payments for vendors using payroll functionalities provided by an ERP solution. EFTs are incredibly accessible as long as there is an internet connection to make payments and transfer funds across various bank accounts through your ERP solution.
As a business sending cheques can leave you open to the risk of forgery and also can lead to you losing the physical cheque in the process of mailing or shipping the cheque to the receiver. EFT’s are heavily padded with state-of-the-art security features done through a highly secure online network that is constantly maintained with the ability to safely and quickly deposit funds directly into your vendor’s account.
Let’s take a wire transfer as an example to solidify how secure the process here is. The financial institution through which the transfer is made will make sure to send only money that is available within the account. These funds usually will take 2 to 3 business days depending on the receivers/vendors’ financial institution policies, when the transfer is made and accessible the receivers must provide proof of the transfer to confirm its legitimacy before gaining the ability to access these funds.
You also can reverse electronic payments through your financial institution given extenuating circumstances.
With EFT payments being incredibly quick and efficient you can reduce time spent by employees on deposits, transfers, and additional bank fees from transactions. The quicker the transactions the less time is available for cases of fraudulent activity.
How quickly can you move your money using EFT as part of your ERP solution?
A traditional check would need you to wait 14 days for you to transfer or make your funds available due to the various manual processes that are being handled, whereas an EFT transaction can take 1-2 business days domestically and a maximum of 3-4 business days for international transfers. However, most consumer-level transactions are immediate or at least on the same day.
A major advantage of this efficient movement of funds through EFT is that you as a business can administer operational or functional changes of your business immediately through your revenues as they remain updated frequently.
Ok, now that you know why you should use EFTs’ as part of your ERP solution, its important to recognise EFTs’ are an Umbrella term that encapsulates a wide variety of electronic payments;
Here are 7 Types of EFTs’
1. Direct Debit
2. Direct Deposit
3. ATM (Automated Teller Machines) Transfers
4. Mail Order/Telephone Order
5. E-Checks
6. Wire Transfers
7. Debit/Credit Card
How EFT is used as part of your ERP solution
EFT’s have majorly changed the way businesses maintain cash flow, negating the use of checks. By reducing waiting periods for transfers, your clients and your business can easily set up various automatic payments using an ERP solution.
An ERP solution gives you a visual digitized representation of all payables and receivables for your accountant making life easier for you.
As an accountant having control of both accounts receivable and payable through an ERP solution can be vital for survival in a fast-paced marketplace to administer and maintain payments to various vendors.
E-Commerce has led many traditional institutions and businesses to adapt and change to the current world by digitizing payment methods, this can be through digital wallets and also through the use of debit/credit cards through a platform called EDI (Electronic Data Interchange).
EDI acts as a platform through which purchase orders, invoices, and payment data is computerized in a form of digital communication between businesses rather than the traditionally communicating through the paper that can increase wait times and any issues that occur can take days to remedy
An incredibly well-known and popular type of EFT is applied to Point-of-Sale technology, better known as POS. You can find the POS system in commercial malls, retail stores, food stalls, restaurants, it is widely used in physical consumer-level stores as card transactions are widely popular as a form of payment within the context of the modern world.
While this might be the most popular form of EFT as a payment terminal, nowadays design specific POS systems for targeted industries are made by software companies, depending on the size and the yearly revenue of clients
Our proprietary ERP solution offers a continually updated list of banks and BSB numbers when you nominate a creditor to be paid by EFT which only requires additional information such as their BSB and account number
As part of the Automatic Payment Process an electronic banking file, in either an Australian or overseas banking format, is produced. A special CRC security check is also made on this file to ensure no one tampers with it. This file can then be uploaded to the relevant bank for processing. It couldn’t be easier.
So…
EFT’s are efficient in a manner of giving you the user easy access and management for future or past transfers, helping you adapt to fast paced global market through ease of use, accessibility and speed with the help of an ERP system that manages and secures all your transactions for the future.