Payment Options for Direct Deposit Rejected

Payment Options for Direct Deposit Rejected

Direct deposit rejects normally happens when the employee pay check did not post to his/her bank account due to incorrect bank account information or account is closed (there are other reason for rejects but the two are the most common).  

When a direct deposit is rejected a notice is sent to the customer informing them of the reject.  The notice will specify the employee affected and the reason for the reject. 

The amount of the net pay rejected is returned by the receiving bank to the initiating bank and credited back to the employer%u2019s bank account within 3-5 banking days.

There are three ways of paying the employee whose direct deposit has been rejected:

1.  Pay via an Accounts Payable (AP) check. 

%u00B7         Click on the link for the steps in Writing Checks.

 

- Take note of the Account used in writing the AP check as this is the same account to be used to take up the credit of the amount rejected and this should be a wash. 

- Create  Manual Journal Entries to reverse the effect of the written check. Make sure to use the same account debitted in writing the check. This is to avoid crediting the bank in NetSuite twice. Click the link for the steps in Making Journal Entries.

- There is no need to reverse the paycheck rejected. 

- This may not be an option for those who do not maintain physical checks.

2.  Pay the employee via direct deposit but inform employee that he needs to wait until the bank account is Active before a paycheck can be processed. 

%u00B7                  Reverse the original paycheck.  Click on the link for the steps in Creating a Payroll Reversal

%u00B7                  Once the bank account is Active create a paycheck.   Click on the link for the steps in Creating an Individual Paycheck.

- The net pay will be direct deposited to the employee%u2019s account 2 banking days from the date it was committed if done on or before 2:00PM PST.   Corresponding payroll processing fee would apply.

- Create a manual journal entry to take up the refund once the amount rejected is credited back to the actual Payroll Funding.   The entry would be a Debit to the Payroll Funding and a credit to Payroll Float.  Click the link for the steps in Making Journal Entries.

 

3.  Pay via an Employer Printed Check. 

- Although this is not the most common option users may choose this if they have separate bank accounts to process payroll checks and Accounts Payable checks and they only have access or permission to the bank used to process payroll. 

%u00B7                  Reverse the original paycheck. 

%u00B7                  Create a paycheck.

- Create a manual journal entry to take up the refund once the amount rejected is credited back to the actual Payroll Funding.   The entry would be a Debit to the Payroll Funding and a credit to Payroll Float.  Click the link for the steps in Making Journal Entries.

 

Note:

a. Unless there is a need to change the information contained on the original pay check if the user chose either option 2 or 3, make sure that the new pay check will have the same information as the original pay check reversed, i.e. earnings, withholding taxes and deductions.

b. Do not forget to correct the bank account information in all three options in order to prevent direct deposit rejects in the future.