Introduction to ACH

The Automated Clearing House (ACHClosed Automated Clearing House — An electronic network for financial transactions in the United States. Transactions within our software can be made by either check or ACH.) Network is a nationwide system that uses electronic payments exclusively, rather than physical checks or forms. The electronic transactions are passed between financial institutions, corporations, and consumers throughout the country.

The illustrations in the following sections help convey the processes involved in using ACH over the ACH network and in Millennium®.

The ACH Network

Without getting into much detail, the ACH network operates as follows:

  1. Your organization is the originator of the ACH transactions.

These include payroll transactions and commercial transactions.

  1. You create your ACH files for your clients and send them to the Originating Depository Financial Institution (ODFI) for each client (or your own bank).

In Millennium®, the ODFIs to which you send the ACH files are knows as “ACH originators,” which is a simpler way to describe them—even though, technically speaking, your organization is the originator.

  1. Each ODFI transmits their ACH transactions to an ACH operator.

There may actually be two ACH operators involved—one for the ODFI, one for the RDFI (Receiving Depository Financial Institution)—if both institutions do not use the same operator.

  1. The ACH operator sends the ACH transactions to the appropriate RDFI.
  2. The RDFI makes the ACH transactions available to the bank or financial institution where the accounts of receiving employees (for payroll direct deposits, usually) or companies (for commercial transactions) are housed.

The illustration based on a figure in ACH Rules, published by the NACHA—the Electronic Payments Association (formerly known as the National Automated Clearing House Association)—that explains the basic transaction flow within the ACH network:

 

ACH File Formats

The information contained in this topic is provided only as an overview to help you understand the fields in Millennium® that create ACH files. Complete, detailed, and up-to-date information concerning NACHA formats, records, and files are beyond the scope of this topic.

For comprehensive information about NACHA’s ACH record format specifications, please refer to the latest ACH Rules, one of the documents published by NACHA, and its Relevant Web Sites.

Millennium® follows NACHA specifications to create ACH files.

Formats Supported by Millennium®

Millennium® supports PPD, CCD, and CTX formats. According to Standard Entry Class (SEC) codes, they are defined as:

  • PPD — Prearranged Payment & Deposit Entry

A consumer application that includes Direct Deposit (as a credit application) and Preauthorized Bill Payment (as a debit application). In general, Direct Deposit transfers funds into a consumer’s account at the Receiving Depository Financial Institution. The funds being deposited can represent a variety of products, such as payroll, interest, pension, dividends, and so on.

  • CCD — Cash Concentration or Disbursement

A corporate application in which Cash Concentration or Disbursement can be either a credit or debit application where funds are either distributed or consolidated between corporate entities. This application can serve as a stand-alone funds transfer, or it can support a limited amount of payment-related data with the funds transfer.

  • CTX — Corporate Trade Exchange

A corporate application that supports the transfer of funds (debit or credit) within a trading partner relationship in which a full ANSI ASC X12 message or payment related UN/EDIFACT information is sent with the funds transfer. The ANSI ASC X12 message or payment related UN/EDIFACT information is placed in multiple addenda records.

Concerning the PPD, CCD, and CTX formats:

  • The detail record for PPD and CCD formats are the same.
  • The detail record for CTX format is a little different—the fields are 7, 9, and 11.

CTX accommodates 9999 lines of addenda and is used by large corporate customers.

Introduction to NACHA Files

NACHA files are blocks of data, each block being a 94 by 10 matrix (940 characters):

  • Each row of the matrix is a “record” that is 94 characters long.
  • Each block always contains 10 rows.
  • You must transmit your records in blocks of 10 records each.
  • If the last file has less than 10 records of useful data, the remaining rows must be padded with the digit 9 all the way across.

The numbers bellow illustrate the concept of a NACHA file. In this example, you have to send 13 records; therefore, your NACHA file must contain two “blocks” of records, 10 rows each. The last seven records of the second block are filled with 9s to indicate no usable data:

101 011111118 02211111908042309001094101BANK OF NEVERLAND BANK OF SMITHLAND 12345678

5220 CTXAGENCY 080229080229 1022111110000001

6221111111184561237 0000008000FLCS 0005SHELOR CORPORATI FL1111111110000001

705ISA*00* *00* *ZZ*43-2070585 *ZZ*SHELOR CORPORAT*080423*09000010000001

7050*U*00401*000000001*0*P*>\GS*RA*43-2070585 *SHELOR CORPORAT*20080423*0900*0000020000001

7050000011*X*004010\ST*820*9999\BPR*D*80.00*C*DXC*CTX*01*111111118*01*34532344*43-200030000001

705070585*000000001*01*111111118*DA*4561237*20080423*PCS\DED*CS*1234567893216*0802200040000001

7059*8000*123161515*Y*FLPotteShe*21000\SE*4*9999\GE*1*000000011\IEA*1*000000001 00050000001

82200000060011111111000000000000000000008000 111111110000001

5200 PPDAGENCY 080229080229 1111111110000002

62711111111834532344 000000800010001 SHELOR CORPORATION FL0111111110000002

82000000010011111111000000008000000000000000 111111110000002

9000002000002000000070022222222000000008000000000008000

9999999999999999999999999999999999999999999999999999999999999999999999999999999999999999999999

9999999999999999999999999999999999999999999999999999999999999999999999999999999999999999999999

9999999999999999999999999999999999999999999999999999999999999999999999999999999999999999999999

9999999999999999999999999999999999999999999999999999999999999999999999999999999999999999999999

9999999999999999999999999999999999999999999999999999999999999999999999999999999999999999999999

9999999999999999999999999999999999999999999999999999999999999999999999999999999999999999999999

9999999999999999999999999999999999999999999999999999999999999999999999999999999999999999999999

NACHA defines several record types. The first character of each record (bolded) indicates its type. The record types are as follows:

  • 1 — File Header record

Includes originating bank’s name and number, the immediate destination bank’s name and number, as well as the file creation date and time, and file ID modifier.

You provide most of this information in the Header sub-tab in Millennium® (Set Up an ACH Processor).

  • Immediate Destination ABA, 9 numbers in positions 5–13, in bold red
  • Immediate Origin ABA, 9 numbers in positions 15–23, in bold blue
  • File Modifier, 1 character in position 34, in bold black
  • Immediate Destination Name, 23 characters in positions 41–63, in red
  • Immediate Origin Name, 23 characters in positions 64–86, in blue

If the names are less than the maximum of 23 characters, they are padded with spaces.

  • File Modifier, 1 character in position 34, in bold black

101 0111111180221111190804230900A094101BANK OF NEVERLANDBANK OF SMITHLAND 12345678

  • 5 — Batch Header record

Indicates the effective entry date (the date you request the deposits or debits to be settled). Can also identify your company and provide an entry description for the credits/debits in this batch.

The Originating DFI (which is the same as the Immediate Origin ABA, minus the checksum digit or last position of the ABA number) is 8 characters in positions 80–87, in bold blue, which is also taken from the Header sub-tab:

5220 CTXAGENCY 080229080229 1022111110000001

  • 6 — Entry Detail record

Contains the information necessary to post a deposit to or withdrawal from an account. Can include a recipient’s name, account number, and dollar amount.

  • 7 — Entry Detail Addenda record [optional]

Contains additional information relating to the prior entry detail record. Primarily used for CCD+ and CTX (corporate-to-corporate transactions).

  • 8 — Batch Control record

Contains totals for the batch. Appears at the end of each batch.

  • 9 — File Control record

Contains block and batch counts and totals for each type of entry. Provides a final check on the submitted data.

There are records that are known as “discretionary fields.” You can define the information that is sent in those records through “user scripts,” which are explained in User Scripts for ACH Discretionary Fields.

The basic record layout for ACH files:

 

The File Header and File Control records act as “bookends” for the ACH transaction, while the Batch Header and Batch Control records envelope similar entries.

Relevant Web Sites

NACHA—the Electronic Payments Association—provides two web sites concerning electronic payments: