Understanding Prenote Transaction Records
When employees decide to have their payroll payments automatically deposited in their bank accounts, they must provide information about the bank accounts to their employer. The employer must verify that the bank information is accurate before payments are actually deposited into those accounts. The process of verifying employee bank information is called pre-noting.
Pre-noting is a method of electronically testing the accuracy of an automatic deposit bank account before transferring actual funds to the account. If there are problems with the bank account information, the bank provides feedback to the employer to notify them of any errors. Typically, new accounts are prenoted during the first payroll cycle in which the employee is processed after they have submitted their bank account information. During the payroll cycle that the bank information is prenoted, the employee receives an actual paycheck rather than an automatic deposit.
The prenote process consists of these steps:
Employees provide bank account information to the payroll department.
The bank information is entered into the system.
The bank information is typically sent electronically to a regional clearing house association facility.
The clearing house facility consolidates all transactions for daily routing to all member banks.
Member banks receive and verify that the auto deposit instructions submitted through the clearing house facility are accurate. If errors are discovered, the originator of the test is notified of the problem for correction and retesting.
Note: This prenote cycle typically requires ten days from the time the clearing house facility receives the transaction.
The Auto Deposit Pre-Note Bank File program (R055011) allows you to generate prenote transactions as soon as you enter automatic deposit instructions into the system. Generating the prenote transaction before the employee is paid expedites the verification process and increases the probability that employees receive their first payment through an automatic deposit rather than a live check. Expediting the verification process reduces the number of live checks that an organization must distribute.
For example, if you hire an employee who is not scheduled to begin working for your organization for several weeks, you can process the employee's prenote transaction before they begin working. By completing the prenote process ahead of time, the employee's first payment can be generated as an automatic deposit rather than a live check.
When you create the prenote transaction using the Auto Deposit Pre-Note Bank File program, the system assigns a start date to the employee's automatic deposit information. This start date is determined by adding the number of days that you enter in the processing options for the Auto Deposit Instructions program (P055011) to the system date. We recommend using a value of 10 days or more to ensure that the prenote process is completed before funds are deposited into the accounts. If the employee is paid before the start date that is associated with their automatic deposit instructions, the employee will receive a live check rather than an automatic deposit.
In addition to pre-noting new automatic deposit instructions, you must also prenote bank information when an employee changes existing automatic deposit instructions. The system uses the value in the Pre-Note Flag and Tr Cd (transaction code) fields on the Automatic Bank Deposit Instructions form to determine which records to include in the prenote process. If the Pre-Note Flag field is set to P, all automatic deposit instructions for the employee are included in the prenote process. If the Pre-Note Flag field is set to N, only automatic deposit records with a value of 23,28,33, or 38 in the Tr Cd field are included in the prenote process.
After you enter or change automatic deposit instructions for employees, you must generate the prenote file to send to the clearing house facility. If your organization has multiple business units that use unique bank information, you can create separate clearing house facility files for each business unit. To do this, you must set up automatic deposit tape file information for each business unit.