What is EFT? All about electronic funds transfer (EFT) payment methods

Electronic Funds Transfer (EFT) is the digital transfer of money between bank accounts without the need for paper-based transactions like checks or cash. It enables fast, secure and automated financial transactions, making it a common method for payments in both personal and business banking.  

When working with mass retailers, Electronic Funds Transfer (EFT) plays a crucial role in streamlining financial transactions between brands and the retailer. Here’s how it’s commonly used:  

1. Vendor payments (accounts payable) 

• • Automated payments: Retailers pay vendors via ACH (Automated Clearing House) transfers instead of issuing paper checks. Payments are scheduled according to agreed-upon payment terms (e.g., net 30, net 60 or net 90).  

• • Remittance advice: Retailers provide digital remittance details, showing invoice numbers and deductions (e.g., chargebacks, co-op marketing fees).  

2. Chargebacks & deductions 

• • Automatic deduction processing: If the retailer applies chargebacks (e.g., late shipments, compliance violations), they deduct these amounts directly via EFT.  

• • Reconciliation & dispute management: Vendors monitor EFT transactions to match payments with invoices and address any disputes through the retailer’s vendor portal.  

3. Co-op marketing & fees 

• • Advertising & promotional fees: If a brand participates in a retailer’s co-op marketing programs (e.g., in-store displays, digital ads), fees are deducted automatically via EFT.  

• • Slotting & compliance fees: Any fees related to product placement, in-store promotions or compliance fines may be deducted via EFT.  

4. Purchase order & invoice processing 

• • EDI (Electronic Data Interchange) integration: Many vendors use EDI to electronically submit invoices and receive payments through EFT, reducing manual paperwork and speeding up transactions.  

• • Automated invoice matching: EFT payments are matched with purchase orders and delivery receipts in real-time, helping vendors manage cash flow efficiently.  

5. Returns & reimbursements 

• • Product returns: If a retailer returns unsold or defective products, refunds or chargebacks are processed via EFT, automatically adjusting vendor balances.  

• • Rebate & incentive programs: If vendors offer volume-based rebates or sales incentives, adjustments may be settled through EFT.  

There’s also plenty of benefits associated with the EFT payments, some of which are included below:  

• • Faster payments: Reduces delays compared to checks.  

• • Improved cash flow management: Predictable payment cycles help brands plan finances.  

• • Reduced administrative work: Automates invoicing, reconciliation and compliance tracking.  

• • Enhanced transparency: EFT ensures real-time tracking of transactions.  

Now that you’re familiar with some ways that EFT is commonly used with retailers – as well as some its topside benefits – you’re in a great position to evaluate whether it’s the right time to initiate use of EFT as you continue to build and scale your business.

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