Vendor Payments and the Delivery of Payment-Related Information:

What you need to know about the process and what to ask your financial institution.

Background:

Provisions of the Debt Collection Improvement Act of 1996 referred to as "EFT" require that the majority of Federal payments be made by electronic funds transfer (EFT). These payments include consumer payments to individuals such as Social Security payments and corporate payments to companies providing goods or services to the Federal Government. EFT impacts every Federal Government vendor regardless of the size of the company or the goods or services provided. If you are not already doing so, you will need to arrange to receive payments and payment-related information electronically.

Automated Clearing House (ACH) Payments or Financial EDI:

The Automated Clearing House is the primary system used by financial institutions, governments, companies, and consumers to transmit and receive electronic payments. To receive electronic payments through the ACH for vendor payments, you are required to enroll with each Federal agency with which you do business. The ACH Vendor/Miscellaneous Payment Enrollment Form (SF 3881) requires you to provide the Federal agency your financial institution information (account number and routing number) so the funds can be deposited electronically to your account. Depending on the capabilities of the Federal agency with which you do business, the electronic payment will be sent in one of two ACH formats:

1. Cash Concentration or Disbursement Plus Addendum (CCD+) for one payment and one invoice. This format contains one 80-character "addenda" record for transmitting the payment-related information.
   
2. Corporate Trade Exchange (CTX) for one payment and multiple invoices. This format allows for 9,999 addenda records for transmitting payment-related information.

You will need to work with the Federal agency to determine what information you need to identify the payment. The addenda record accompanying the payment can contain the invoice number, contract number, purchase order number, or any specific number that helps you identify the payment. This process is referred to as Financial Electronic Data Interchange or Financial EDI. Financial EDI is used by thousands of businesses daily to exchange payments, payment information, or financial documents in standard formats.

Financial Institutions and the Delivery of Payment-Related Information:

The rules that govern the ACH system address the delivery of payment-related information. Upon your request, financial institutions must provide you with the payment-related information by the opening of the second business day after the payment posts to your account. This rule impacts all financial institutions processing ACH payments. Financial institutions considered to be "EDI capable" have the means to translate the payment-related information as the payment posts to your account and provide the information to you via a paper report, fax, e-mail, or through an electronic transmission.

Questions to Ask Your Financial Institution:

You should contact your financial institution prior to enrolling for electronic payments to discuss the delivery of the payment-related information. Depending on the type of account you have (corporate/business or consumer/retail), you may need to determine the appropriate area within your financial institution to contact. This could be the local branch that you do business with or the corporate cash management contact at the headquarters office or operations center. Here are several questions to ask your financial institution:

• Can you provide payment-related information that may accompany electronic payments to my account?  Your financial institution may have a package of services available from which you can choose the best method for receiving the payment-related information.
  
• How can you provide this payment-related information to me?   Paper, fax, electronic reports, or e-mail are acceptable means to be considered "EDI capable" and to be in compliance with the ACH rule change.
  
• How quickly can you provide the payment-related information to me after the electronic payment posts to my account?  By the opening of business on the second business day following the settlement date of the payment is acceptable and is in compliance with the ACH rule change.
  
• Is there a cost for providing this information?  Financial institutions have different fee schedules for different services and the cost may be determined by your account type. There may be costs associated with setup, per report delivery, and per addenda or character translation.

If your financial institution charges too much for payment-related data, you may be able to access this data on the Internet through FMS's Payment Advice Internet Defier System (PAID).

Questions/Contacts:

If you or your financial institution have any questions about vendor payments, the ACH, or the delivery of payment-related information, please contact the nearest Financial Management Service Customer Assistance Staff:

Austin, TX . . . . . . . . . . (512) 342-7300

Kansas City, MO . . . . .(816) 414-2100

Philadelphia, PA. . . . . (215) 516-8015

San Francisco, CA. . . (415) 817-7300

or

FMS Austin Financial Center EDI Program Office at (512) 342-7200