I often get questions about how to do direct deposit payroll in Sage 50. There are a few different options, each with different benefits and different costs. Since people often considering implementing new procedures at the beginning of a year, I thought this would be a good time to cover this subject.
OPTION 1 – Sage 50 Direct Deposit
The obvious place to start looking for a direct deposit solution is right inside your existing payroll program. You can subscribe to Sage’s direct deposit service. Once the service is activated, in Maintain Employees you can designate which employees use direct deposit and record their bank account information. After doing payroll, direct deposit transactions can be transmitted right from Sage 50. You can print a direct deposit advice form instead of a check for your direct deposit employees. Since all of the direct deposits will come out of your bank account as one lump sum amount, Sage 50 makes them show on your account reconciliation the same way. None of the other options can do that. Each employee can allocate money to up to 4 bank accounts by amount or percentage.
Up front cost for Sage 50 Direct Deposit are very low. The $75 setup fee will be waived if you sign up through a Sage Solution Provider (such as me). Each transaction costs $1. If an employee deposits to multiple accounts, such as checking and savings, each account counts as a separate transaction with it’s own $1 fee.
OPTION 2 – Create a NACHA File Using an Addon
There are two programs available that can read your Sage 50 payroll data and create a NACHA file which you can then transmit to your bank. With both EZ-Direct Deposit and Automated Direct Deposit you purchase their software and then can use it with no transaction fees. The only ongoing cost would be any fees charged by your bank for processing the ACH transaction. Both allow each employee to allocate to an unlimited number of bank accounts.
To use either of these add-ons you set up your direct deposit employees in their program, then process payroll like normal in Sage 50. Then the direct deposit program reads your Sage 50 payroll data and creates the NACHA file. You submit the NACHA file using your bank’s prescribed method.
Since these programs aren’t part of Sage 50 they can’t make your direct deposit total show as one amount on your account reconciliation. Instead each transaction will show up individually, just like the paper checks. The other downside compared to Sage 50 Direct Deposit is the up-front purchase cost. However if you have very many employees the absence of transaction fees can more than offset the purchase cost, especially if you do weekly payroll.
OPTION 3 – Use Your Banks Web Payment Services
If you don’t like either of those options you may have another choice that is very low cost or maybe even free. Many banks let you make payments through their web site. You set up each employee that wants direct deposit as a payee on the bank’s web site. Then after processing payroll in Sage 50, you manually enter the direct deposit amount for each employee into the bank’s payment system.
The advantage of this option is obviously that there is no software to buy and transaction fees are usually very low or nonexistent. The disadvantage is equally obvious. The process is entirely manual so it is up to you to make sure all amounts are entered correctly, and nobody is left out or given a check and direct deposit. Of course direct deposits will each show up individually on the account reconciliation in Sage 50.
SUMMARY
Sage 50 Direct Deposit offers the most convenience and the tightest integration with payroll. The lack of up front fees is nice. But if you have a lot of employees and/or pay frequently, the transaction fees may surpass the purchase price of one of the add-ons.
If you are wiling to pay their up front purchase price, EZ-Direct Deposit and Automated Direct Deposit allow you to avoid Sage 50 DD’s transaction fees. And they can read your Sage 50 data so they avoid the potential for human error inherent in manual processes. But bank reconciliations will be less convenient because each direct deposit paycheck will show individually instead of combined as they will be on your bank statement.
Finally, your bank’s electronic payment services may provide a free or low cost alternative. But since the process is entirely manual, it is more time consuming and allows more opportunity for errors.
No matter which method you choose, you may need to adjust your normal payroll schedule because banks require time to process direct deposit transactions, typically about 2 days.
