The days of going to a bank to deposit money or checks into an account are long gone. Nowadays, everything is done online, especially when it comes to financial transactions. Just consider how challenging it would be for a business with offices worldwide to manage costs, invoices, and revenue physically!
EFTs are helpful in situations like this. Electronic Funds Transfer, or EFT, is a term used to describe a particular electronic payment. An EFT account is crucial as technology develops and we seek to have everything in one place. It offers simple access to all reports, financial data, and significant papers and is entirely paperless.
However, that still doesn’t address the second query: what exactly is an EFT transaction? An EFT transaction is essentially how money is received and spent in general. EFTs are used to move money from one bank account to another and are the electronic equivalent of checks.
There is no need to involve the bank because anyone, even businesses, can transmit money from one location to another. It does away using antiquated checks and paper, whose receipt and account clearing can occasionally take days.
For instance, when you set up credit card monthly bill payments or when you receive your income via direct deposit. Simply said, the definition of EFT in banking is the movement of funds between various accounts, including personal and company accounts.
Definition of EFT payment
Considering an EFT as a pyramid to comprehend all its components is crucial. The top category is an EFT, which includes several subcategories covering payments, industries, and other distinctive traits.
People frequently confuse an EFT payment with an EFT or electronic funds transfer. As was already mentioned, EFT serves as the director, and an EFT payment serves as the specialist. An EFT payment is any electronic transaction mechanism that moves money from one account to another without involving the bank directly.
In B2B (business-to-business) transactions, it is frequently utilized. Wire transfers, cards, eChecks, and automated clearing houses are common types (ACH). There are even more payment methods outside the business sphere, which are covered in more depth below.
EFT in accounting
An accountant must be in charge of both the accounts receivable and the accounts payable, whether they are in control of the finances of a small business or an individual. These payments are necessary for survival and, if mismanaged, can lead to dangerous circumstances.
Checks are no longer used in accounting due to the use of EFTs. This has been a tremendous lifesaver for a business in terms of preserving cash flow. Customers and organizations may now easily set up automated payments by doing away with the wait times associated with sending in checks. This is especially helpful when using an Enterprise Resource Planning (ERP) system because everything is digitized, allowing for complete visualization of all payables and receivables.
Accountants may quickly access the account with all the information and manage invoices even if a payment is past due.
What is EFT in eCommerce?
Numerous businesses have been compelled by the expansion of eCommerce to modernize and abandon antiquated practices. It is no longer reasonable to be fussy with specific payments when these businesses expand beyond brick and mortar into the digital world.
While an EFT is comparable to eCommerce, one thing to remember is that the right payment is more particular. It might be regarded as an EFT sub-branch. It is referred to as an electronic payment system or an eCommerce payment system.
This payment method is integrated with a different system known as Electronic Data Interchange (EDI). EDI is a platform that automates data linkages between documents like purchase orders and invoices and computerizes communication previously done on paper.
Credit cards are the most common method of payment for online purchases. Alternative payment methods, including digital wallets like PayPal, are also commonly accepted.
Definition of EFT in POS
We have all used our credit or debit card to pay at a machine inside a store, coffee shop, or restaurant. This device sometimes referred to as a Point of Sale (POS), is a typical form of electronic payment.
There are many payment terminals, albeit the one stated above is the most typical. Software companies have grown and now create unique POS systems based on size and annual sales for particular types of businesses and organizations.
Although there are still many businesses that only accept cash, this EFT is commonly utilized in physical and mortar establishments. It is essential to business growth because credit and debit cards are the preferred method for financial transactions.
What various types of EFT?
- Money Transfer: EFT deposits are frequently utilized at work and allow employers to pay their employees’ salaries electronically. It may be thought of as a digital paycheck, in a manner.
- Automatic Teller Systems (ATMs): A device that offers other banking services and the ability to withdraw and deposit money.
- Debit and credit cards: You can send payments and shift money around to pay bills using EFT debit and credit cards.
- Transfers through Wire: These are most frequently employed when dealing with substantial sums of money, such as a down payment.
- Digital checks: These checks, which include your account and routing information, are used to make electronic payments and are similar to their paper version.
- Phone Wallets: You can now add a credit card, make payments, and more on smartphones as if they weren’t already easy enough.
- Banking on a personal computer: The ability to send and receive e-transfers, make payments, and switch accounts online are now available from all financial institutions.
There is no denying that the EFT network is extensive and widely utilized by individuals and businesses to facilitate payments.
The act governing electronic funds transfers (EFTA)
Making an EFT payment might occasionally make people anxious. Our data is transferred across the internet highway, and everything is done “behind the scenes.” Is it protected? What happens if I don’t get my money? For this reason, there is the Electronic Funds Transfer Act or EFTA.
Whether it’s error resolution, consumer liability, or identity theft, the EFTA is responsible for security and compliance when someone performs an EFT. Customers can file lawsuits against banks or other financial organizations if something goes wrong and they violate any rules set forth under the act.
EFT with NetSuite
ERP software like NetSuite is used in businesses. Its capabilities nearly make a trip to the bank seem antiquated as a financial answer. The Cloud, electronically, is where everything is done, from automating operations to arranging invoices.
Now, nothing changes in terms of the EFT meaning in NetSuite. Although it has all an ERP’s features, the concept is the same. The EFT bundle is available to all NetSuite users without charge.
Once installed, NetSuite will use the data from your bank to set up the account and prepare it for future transactions. You will be able to cover staff salaries and other business expenses, just like you can with an EFT payment.
Regarding data security and confidentiality, NetSuite also offers a high level of protection. You are aware that your data is secure in addition to EFTA.
If you’re still unsure what an Electronic Funds Transfer (EFT) is suitable for, watch our CEO Martin McNicoll as he explains an EFT payment and how to use it with NetSuite ERP.
Final Thought
Taking Your Business to the next step can only come to reality if you have the right expertise to deliver outstanding solutions. At Seibert Consulting Group, we specialize in delivering modern solutions to businesses that aim at taking full advantage of the eCommerce platform. We always customize our solutions to align with Your Business’ requirements and goals. Let’s start talking about your project and find out how we can help Your Business grow. Get in touch with us via our chatbot or email at hello@seibertconsulting.com and via our direct line at 760-205-5440.
