Setting up direct deposit starts with your payroll system. If you’re not already using payroll software or a payroll service, you’ll need to choose one that supports ACH direct deposits. Most modern payroll platforms like Gusto, ADP, Paychex, or QuickBooks Payroll include direct deposit as a standard feature. The setup process varies slightly by platform, but the core steps are the same.

Your business bank account needs to be connected to your payroll provider. This usually involves verifying the account through micro-deposits or by logging in through your bank’s online portal. The payroll provider uses this connection to pull funds from your account and distribute them to employee accounts. Make sure your bank allows ACH transactions and that you have the authority to connect external services.

Collect a direct deposit authorization form from each employee who wants to participate. This form captures their bank name, routing number, account number, and account type. Employees should also indicate whether they want their full paycheck deposited or a specific portion. Many employees split deposits between accounts for savings purposes. Keep these authorization forms on file because they’re required documentation if you’re ever audited.

Enter the banking information into your payroll system carefully. Most providers run a prenote or verification transaction before the first real payroll. This is a zero-dollar test that confirms the account exists and accepts deposits. Prenotes typically take 2-3 business days, so plan accordingly when onboarding new employees.

Timing matters more than most business owners realize. Direct deposits don’t happen instantly. Most payroll providers need you to submit payroll 2-4 business days before payday for funds to arrive on time. If you miss the cutoff, employees might get paid late. Build the submission deadline into your routine so it becomes automatic.

Massachusetts allows employers to require direct deposit, but employees can request at least one alternative payment method. If an employee doesn’t have a bank account, you’ll need to offer paper checks or a payroll card as an option.

The most common mistake is entering account numbers incorrectly. A single wrong digit sends money to the wrong account or causes the deposit to bounce back. Have employees double-check their information, and verify it against a voided check when possible. A payroll system setup service can configure everything correctly from the start and train you on the ongoing process.

If payroll administration feels overwhelming alongside running your business, working with a small business bookkeeping service that handles payroll means fewer mistakes and less time spent on tasks that take you away from what you do best.