Why do we need EFT Payments?

You’ve heard of EFT payments, but you’re still unsure of what exactly they are or why they matter? Perhaps you’re looking for a more efficient way to manage payments? If you want to know all about EFT’s then, read on as we list all of the information you need to understand what exactly EFT payments are and give you the confidence to start using them.

What is an EFT Payment?

First off, EFT stands for Electronic Funds Transfer, these are electronic payments that allow you to debit (or request a credit) into another bank account. EFT Payments allow you to send or collect payments directly. You can also set up EFT payments for single or recurring payments.

Why is it important to be aware of the different payment types?

Managing payments is critical for the functioning of any business. Accountants know all too well the importance of cash flow and that the money from customers provides the funds to pay salaries and keep utilities working as well as pay the rent. On the same token, payments to your suppliers allow you to acquire the goods you need to produce your products and services. This concept seems simple enough, but payment terms, seasonality, or collection issues can hinder a seemingly simple process. It is important to be aware of the different payment types because some options give you greater control over your cash flow (EFT is one of those types) and some payment methods also offer greater control and security, which is another critical consideration for any financial department or business leader.

How do EFT Payments help my business?

EFT payments are faster and offer more security than cheques, money wires, or credit cards. EFT’s are also more convenient for you and your vendors and customers. The payment is taken directly from the payers’ bank account and deposited in the recipient’s bank account, which means there is no need to print or sign anything, make a trip to the bank, or pay off a credit card bill later. They are an excellent option for businesses that want to make payments to another organisation quickly. For recurring bills or regular clients and suppliers, payments are more streamlined through EFT payments. Because the payment is taken directly from a bank account on a date that is mutually agreed upon you have greater control over the dates that you receive payments and that money will be taken from your accounts.

What is the process for making an EFT Payment?

To initiate an EFT Payment, you need to get permission and bank account information from the vendor or customer from whom you would like to send or collect payment. If you are using your bank, you will either need the destination account details for purposes of sending a credit or a mandate completed by the person/entity on which you are collecting.. Using this information, you can set up the appropriate EFT payment via the necessary channel.ie. Internet or corporate online banking system.

Once the payment is set up, it will be processed on the correct date. Depending on the provider, it can take 1-2 business days for transactions to appear in the payee’s bank account. Modern payment systems have a facility for real-time or near to real-time payments, which flow from one account to another within a matter of minutes.

What About Security?

You can have peace of mind knowing that EFT payments are a completely safe way of making payments. While it may feel strange at first, giving away your bank account information you’ll never need to make a stop payment on cheques that were lost or stolen in the mail since EFT is handled electronically. It’s also more difficult for fraudsters to make off with your money if you use EFT payments because not all EFT payments are  immediate, meaning that many of them  can cancel them within a limited time. EFT payments are transmitted via secure links and platforms, which normally comply with latest industry standards.

EFT Payments are great but be mindful that it will still be up to you to ensure that your billing and payment cycles provide you with enough cash flow to run day-to-day operations. With modern payment systems, mandate/authorisations to debit are very specific, making an overpayment unlikely. Even with EFT payments, it is possible to have a failed payment if your client has insufficient funds in the account you are debiting. However, you will know this much sooner than if you had been paid another way.

EFT payments are a great way to move your business from archaic paper-based processes to modern, electronic methods. Get started with EFT payments so that you can finally cut out the piles of paperwork for good.

**Note that in Africa, both Namibia and South Africa have stopped the use of cheques, and from 30 September 2021, Lesotho will be discontinuing the use of cheques too.