The Benefits of Verifying Bank Accounts for Payroll
As any business leader knows, paying employees accurately and on time is fundamental to maintaining morale, productivity, and trust. With 93 percent of American workers opting to be paid through direct deposit, verifying the accuracy of every employee’s bank account information is critical to ensuring secure, compliant, and efficient payroll operations.
Security and Fraud Prevention
Any operation involving the electronic transfer of funds can open the door to fraud, and payroll is no exception. Instantly verifying bank account information before processing payroll helps mitigate the potential for fraud by ensuring that the bank account details provided by employees are legitimate and belong to the intended recipient.
- Identity Verification: Bank account verification allows businesses to cross-check the account holder’s information against bank records, thereby confirming the authenticity of the provided details. This process helps identify any discrepancies that may indicate fraudulent activity.
- Reduction of Payroll Diversion: Verification ensures that payroll funds are not diverted to unauthorized accounts. This is particularly crucial in large organizations where multiple personnel are involved in the payroll process, increasing the risk of insider threats.
Reducing Returns
Any number of factors could result in a direct deposit being rejected and returned to an employer’s account, including:
- Missing or incorrect account information
- Missing or incorrect routing number
- An existing routine or account number for an account that doesn’t belong to that employee
- A frozen or closed bank account
Employees depend on receiving timely and accurate wage payments, and even a short delay could leave some workers in dire financial straights. Unfortunately, banks generally take several business days to return a rejected or misdirected payment to the originating account. By verifying employee bank account details ahead of time, businesses can significantly reduce the potential for direct deposit returns, ensuring that payroll is processed smoothly and that all employees receive their earned wages on time.
Ensuring Compliance
Payroll errors can lead to significant legal repercussions, financial penalties, and damage to a company’s reputation. Verifying employee bank accounts for payroll purposes helps businesses remain in compliance with all state, federal, and industry-specific regulations by ensuring that timely payments are made to valid and correctly identified accounts.
Enhancing Employee Trust and Satisfaction
Employee satisfaction is closely linked to the reliability of payroll processes. Any disruption in salary payments can cause significant distress and dissatisfaction among a company’s workforce. The reliability facilitated by bank account verification fosters trust between the employer and employees, contributing to a positive workplace environment. Employees can be confident that their salaries will be paid correctly and on time, reducing stress and enhancing overall job satisfaction.
Improved Efficiency
Efficient payroll operations are crucial for the smooth functioning of any business. Verifying bank accounts reduces the likelihood of errors that require administrative follow-up, freeing HR and payroll staff to focus on other critical tasks and improving overall productivity.
Cost Savings
Employers will likely incur extra bank fees and administrative expenses when inaccurate bank details lead to unsuccessful payroll transactions. Additionally, payroll fraud can cause substantial financial losses. Verifying bank accounts safeguards a business’s bottom line by reducing the potential for failed transactions and fraud.
Smoother Onboarding
The onboarding process for new employees involves numerous administrative tasks, including collecting information necessary to run payroll. Verifying an employee’s bank account at this stage has significant advantages:
- Efficient Data Collection: Verification ensures that the bank account details collected during onboarding are accurate, reducing the likelihood of errors later in the payroll process.
- Positive First Impressions: When new employees receive their first paycheck without issues, they’re more likely to develop a positive first impression of their employer, fostering trust and goodwill from the outset.
Take a Proactive Approach to Bank Account Verification
By taking a proactive approach and verifying the true ownership of each employee’s bank account before processing payroll, your company can ensure direct deposits always end up in the right hands. Lyons Commercial Data has been a leading provider of data verification tools since 1989. In many cases, we’ve been able to help our clients reduce their rates of returned payments by over 50 percent.
Interested in learning more? Connect with us today to book a demo for your team.