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Managing ABA Payments

The foundU Team
October 10, 2023
9 Min Read

Australian Banking Association (ABA) files are vital but often overlooked components of payroll software.  They're the essential link between a pay system and employee bank accounts.  ABA files are that final step – after payslips are generated and issued – that puts the money where it’s supposed to go. 

Managing ABA payments can present several pain points for payroll teams.  There's a requirement to have and maintain a certain level of technical and banking knowledge.  There’s also the variation in compliance requirements across different banks, challenges in reconciliation, maintaining a clear audit trail, and keeping up with regulatory changes.  In many cases a large volume of manual data entry is necessary.

We'll delve further into these issues – and what you need to succeed – shortly, but first a quick look into what an ABA file is.

 

What is an ABA? 

If you’re a business paying multiple employees to multiple Australian bank accounts from one bank account, then it’s a safe bet that ABA files are being used to facilitate this process. 

The information and codes required for an ABA file are provided by each specific financial institution and set up in your payroll software, which generates the files according to a specific format and extension. 

The files contain payroll data which is downloaded from your payroll platform and then uploaded to your financial institution so payments can be processed from your business's account to your employees’ accounts in one go.  This digital dance is what gets people paid. 

That’s the basics. 

While payroll and finance officers are already familiar with this information, it helps if other people in your business understand this as well.  Knowing that funds often do not travel directly from payroll software to the bank may help those who aren’t a part of the process appreciate what's involved. 

 

Common issues with ABA payments 

Straight off the bat you might have already noticed one feature inherent to ABA files that may cause a headache for payroll teams.   

Different banks and financial institutions have different requirements for their ABA files. This means that operators need an extra layer of knowledge and expertise specifically around ABA file formats and banking protocols, and how that fits in with the software they’re using for payroll.   

The nature of ABA files – which are usually generated in batches based on pay runs (and aren’t exactly easy to read) - also present challenges for tracking, auditing, and reconciliation.  

If your payroll software is not seamlessly integrated with the ABA payment process, it can mean manual exporting and importing of data, leading to inefficiencies, potential data errors, and duplicated effort.   

 

Conditions for success 

Considering all the above, what features, and functionality are required for seamless managing of ABA payments? 

Firstly, you’ll want an option for automation, so that ABA files are generated immediately on processing payslips.  You shouldn't have to wait around for twenty minutes, just to realise you forgot to hit generate.

You’ll also want the capability to mark your downloaded ABA files with a Payment Reference Number for record keeping.  This will help with tracking, compliance, and reconciliation.

If you run a large-ish payroll, the ability to view which payslips are associated with an ABA will further enhance your reconciliation (and investigation) processes.  Particularly when reviewing any edits or adjustments. 

Speaking of editing, if you only want to make changes to a specific payslip or payslips, do you really want to generate another whole ABA for that pay run, or just one for those corrections/edits?  Can you create a new ABA for specific employees with your current system?  These are important questions to ask, to ensure your processes are smooth.

If you have made edits or processed a few different pay runs but then want to keep everything together, merging ABA files may also be a handy tool to have.

As well as search functionality – can you search by period end or payment date? Is it easy to find the file/s you need? 

If you like to keep things tidy on your screen, or perhaps you’ve been doing some error handling but are cautious about deleting files, then being able to archive and recover ABA files is a must. Do you have a bulk archive option? 

To make life easier for things like audits and tracking, having a component or aspect of your software’s UI to easily view and export your ABA history is another feature you’ll want to have at your disposal.

While on the topic of UI, does your payroll software make it easy to update your ABA payment settings if your bank changes its information? 

Flexibility and ease of use are an important aspect of ensuring your payroll time doesn't blow out.

 

Time to assess

As you can see there are quite a few considerations for managing ABA payments, and not all platforms are equal. 

While we can’t change the antiquated ABA system itself, at foundU, we’ve done our best to streamline everything that precedes it. The ease of navigating our ABA management tool does wonders to offset the frustration of trying to decipher the content of ABAs themselves.

Now is always the best time to review where you can take advantage of tools and functionalities to make your whole payroll process more efficient, compliant, organised, and just generally less stressful.

Of course, all the above features and capabilities mentioned are already available to you if you’re using foundU!

 

Want to know more about foundU? Book a Demo

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