A direct deposit invoice is used for a product or service that is to be paid via ACH instructions by the billing party. This is common if an independent contractor is to be paid on a recurring basis with payment transferred directly to their bank account. A standard direct deposit authorization form should accompany the invoice with the billable party’s signature.
Table of Contents
- What is Direct Deposit?
- Direct Deposit Authorization Form (Requirements)
- How Long Does Direct Deposit Take?
A direct deposit is a way of depositing a check into a person’s bank account without having to physically go into a bank each time to deposit a check. A direct deposit electronically transfers funds into another person’s bank account and once the process is set up, direct deposits can continually be a method of payment. Direct deposits offer a faster and more secure way to send funds than using a check. Direct deposits are widely popular when doing the following:
- Employers paying employees automatically and seamlessly on-time every week.
- The U.S. Treasury depositing social security checks in senior citizens’ bank accounts.
There are companies, Quickbooks for example, that specialize in setting up businesses with ability to offer direct deposit services for their employees.
When hired by an employer, they will give an employee two options to be paid – either by check or by direct deposit. The only information an employer needs in order to make a payout with a check is the employee’s full name. With a direct deposit, however, the employer will first need the employee to fill out a direct deposit authorization form which only needs to be filled out once and provide a voided check from their bank account.
Depending on the bank the following will be required to be included:
- Account Holder’s Name;
- Mailing address;
- Bank Name;
- Account Number;
- Routing Number;
- Signature; and
- Other Details (if required): Swift (BIC) or IBAN.
- Banking information (account and routing number) should always be taken from a bank check and NOT from a deposit slip.
- ACH transactions must be able to be accepted. Problems usually occur when depositing to bank accounts not located in the United States.
- If direct depositing to a savings account, double check with the bank to verify the correct account and routing number.
- Money market accounts should be treated the same as checking accounts when making deposits.
Once deposited, a direct deposit can be seen immediately within the receivers account but depending on the bank, the time it takes to process and clear varies. Normally it should not take more than 1 or 2 days for a direct deposit to clear (the ability to withdraw funds).