Understanding the Funds Transfer Process

Cash Management defines and supports these two funds transfer methods:

  • Bank account transfers

    Bank account transfers are used by your organization to transfer money between banks that are on your organization's general ledger (from one of your organization's bank accounts to another bank account belonging to your organization). This could be a transfer between your internal bank accounts, between your external bank accounts, or between your internal and your external bank accounts. PeopleSoft defines the following two categories of bank account transfers:

    • External bank transfers are used by your organization to transfer money between banks that are on your organization's general ledger (from one of your organization's bank accounts to another bank account belonging to your organization).

    • Internal bank transfers are transfers between business units using internal banks and internal bank accounts that you have created for your organization.

  • EFTs

    EFTs are used to transfer funds from your organization's bank to an external third party.

For bank account transfers and EFTs, you can send funds transfers from templates, as well as on an ad hoc basis. To minimize the amount of manual entry when sending these ad hoc funds transfers, you can complete recipient information from settlement instructions, such as when you are paying a supplier who provides occasional services.

Cash Management also includes repetitive transfer, drawdown transfer, and prenotification functionality. Repetitive transfers and drawdown transfers are preapproved agreements to transfer monetary amounts on a periodic basis. (The Federal Reserve Banks operate the Fedwire Funds Service, which supports four types of transfers: repetitive, semi-repetitive, non-repetitive or freeform, and drawdown. PeopleSoft funds transfer functionality supports all four transfer types.) There is not a funds transfer method as described above for bank account transfers and EFTs. The relationship of the involved parties determines whether a repetitive or drawdown transfer is in the form of a bank account transfer or EFT. A prenotification is a file sent to a debtor's bank to test if payments may be made to a creditor through a specified bank account. The creditor will not process a payment made through the debtor's bank account until a prenotification is sent and successfully processed.

Cash Management supports the following transfer types:

  • A repetitive transfer is used when a company frequently makes a transfer between the same debit and credit parties.

    The parties involved may be your organization and your bank—or your organization, your bank, and a third party. The Originating Depository Financial Institution (ODFI) has a record of the debit and credit parties and receives electronic and telephonic instructions to make the transfer. The ODFI also assigns a unique identifier to each instruction template. The items communicated to the ODFI as part of the transfer consist of the unique identifier, the date of the transfer, and the dollar amount. Of these three items, only the date and dollar amount may be changed, which decreases the risk of misdirected funds.

  • A semi-repetitive transfers is similar to a repetitive transfer.

    The difference is that you can also modify the transfer description, in addition to the amount and date information.

  • A non-repetitive or freeform transfer is used for ad-hoc transfers; you can edit all fields.

  • A drawdown is a request sent by a company to an ODFI to initiate a wire transfer from its own account or another party's account at a Receiving Depository Financial Institution (RDFI).

    For drawdown transfers, the RDFI is the payor of funds. The RDFI requires that it have authorization for payment from the account holder—meaning the party being debited must preauthorize the transfer.

    Drawdown transfers are most frequently used as part of a company's cash concentration system. Organizations use cash concentration systems to consolidate many bank accounts (operated by individual areas in the organization) to a cash position in a single account.

    Drawdown transfers are also a subset of repetitive transfers. You can set up a drawdown transfer to be a repetitive transfer.

  • A prenotification or "prenote" is an EFT Request used to verify that payments can be made to a creditor from the debtor's bank account. Prenotes are created using a transfer template. From the template you can create a prenote which is basically an EFT for a zero dollar amount. After settling the EFT, the prenote will then be processed via Financial Gateway like any other EFT. Prenotes can only be settled through Financial Gateway.

    In the case of ACH prenotes, if no return is sent back after a specified number of days, then the debtor can assume that it can send payments to the creditor's bank account. A back-end process updates the prenotes' status after the specified number of days has passed.

    If an ACH Return file is received from the creditor's bank, it will contain information that the prenote had errors that must be corrected before the creditor will accept payments from the debtor. The creditor must send a new, corrected prenote. If no return file is received after the defined number of days, then it can be assumed that the debtor's payments will be processed by the creditor's bank.

You can set up preapproved repetitive transfers and drawdown transfers in the Cash Management funds transfer pages, creating a template that stores the repetitive transfer agreement information. This information includes the unique identifier assigned by the bank that authorizes (or administrates) the transfer.

Note: As repetitive transfers and drawdown transfers are preapproved and preconfigured agreements, they cannot be initiated on an ad hoc basis.

Funds Transfer Business Process

To process funds transfers, you create the transfer (either ad hoc or using a template), select it for settlement, and if required, route it for settlement approval. After it is approved, the system forwards the transfer to either the Financial Gateway or obtained via Pay Cycle Manager depending on what you select on the Settle Through field on the External Accounts - Payment Methods page. Use the dispatch settlements functionality to transmit the transfer to the appropriate bank and bank account.

For repetitive and drawdown transfers, only the repetitive transfer code (for drawdown transfers, this is the third-party authorization code), amount, and date are transmitted to the ODFI.

Here is a general overview of the steps in the funds transfer process:

  1. Create all of the templates required by your organization.

    Here are some possible combinations:

    • Bank account transfer.

    • Bank account transfer as a repetitive transfer.

    • Bank account transfer as a drawdown transfer.

    • Bank account transfer as a repetitive drawdown transfer.

    • EFT.

    • EFT as a repetitive transfer.

    • EFT as a drawdown transfer.

    • EFT as a repetitive drawdown transfer.

    • EFT as a prenotification.

  2. Approve new and modified templates.

  3. Create a bank account transfer or EFT request.

  4. On the bank account transfer or EFT request, select the appropriate template to create the specific transfer needed and provide any necessary transfer information to complete the transfer instructions.

    You are not required to select a template if the transfer is considered a freeform transfer.

  5. Select and approve transfers for settlement using the Settlement Manager.

  6. Dispatch settlements to the appropriate banking institution for payment using Financial Gateway.

    Note: If the settlement is to be settled through Pay Cycle Manager, it will be picked up at a later time.

The system processes the approved funds transfers and generates the appropriate accounting entries. Accounting entries for EFT transfers may be generated only if an accounting template has been specified on the EFT transfer request. Accounting events for bank transfers are automatic and do not need an accounting template.

If Financial Gateway is used as the settle-through option, you can, with the proper setup, get periodic updates to the original transaction until the settlement is paid. For wire transfers, the system can be configured to update the transaction with the Fed Wire ID generated by the bank for reference during inquiries.

Prenotification Process

To create a prenote:

  1. Create a new EFT template on the Enter Transfer Templates - Origin page using a payment method and a payment layout that will support prenotes and select the Prenote check box.

    See Understanding the Layout Catalog.

  2. (Optional) Access the Prenotification Details page.

    The prenote status is assigned a status of "New." You can set the number of calendar days that must transpire after the prenote is sent to Financial Gateway before the prenote status changes to Confirmed by the system if no ACH Return file is received.

  3. Approve the template on the Approve Transfer Templates page.

    Upon approval, the system will prompt you to create a zero-dollar EFT Request, which serves as the transaction representing the prenote.

  4. Click Yes.

    The EFT Request page is displayed with the Prenotification field selected. All of the information from the template is transferred to this EFT Request transaction with a zero-dollar amount.

  5. Select the prenote for approval from the Select Settlements page.

  6. Approve the prenote EFT Request from the Approve Settlements page.

  7. Dispatch the prenote in Financial Gateway just as you would any other payment.

    This changes the status from "New" to "Pending." If no return is sent back from the bank within the number of business calendar days specified on the Prenotification Details page, the prenote status changes to "Confirmed." The status change is performed by a batch process that checks the number of days that have transpired since the creation of the prenote and compares it with the number of days specified on the Prenotification Details page (see Step 2).

    If a return acknowledgment file is sent back from Financial Gateway, the prenote status changes to "Rejected" and the template will not be approved for use. If the errors in the prenote are correctable, a second prenote may be sent using this template. The status can be reset from "Error" to "New."