How do I set up direct deposit for employees?
Direct deposit isn’t something you set up on its own. It’s a payment method within your payroll system. If you don’t have payroll software or a payroll provider yet, that’s the first step. QuickBooks Payroll, Gusto, ADP, and similar services all include direct deposit as a standard feature.
Once your payroll system is in place, connect your business bank account. The payroll provider needs to pull funds from your account to distribute to employees. This usually involves entering your routing and account numbers and verifying ownership through small test deposits or instant bank verification.
Collect a direct deposit authorization form from each employee. This form includes their bank name, routing number, account number, and whether it’s checking or savings. The employee signs it, giving you permission to deposit wages into that account. Most payroll software provides a template, or employees can enter their information directly through an employee portal.
Enter the banking details into your payroll system. Double-check routing and account numbers because a wrong digit means the deposit fails and the employee doesn’t get paid on time. Some systems verify account validity before the first payroll runs. Others don’t, so accuracy matters.
Plan for lead time. Most payroll providers require you to submit payroll two to four business days before the pay date for direct deposits to process. If you run payroll on Friday and expect employees to see money that same day, you’ll be disappointed. Know your provider’s cutoff times.
The first pay period with direct deposit sometimes involves a test deposit. Some providers send a small amount to verify the account works before processing full wages. Others run the first payroll as a live test. Either way, have a backup plan for that first check in case something goes wrong with an employee’s bank information.
Not every employee wants direct deposit. Some prefer paper checks, and in New Mexico employers generally can’t require direct deposit. Offer it but be prepared to cut checks for employees who opt out.
If the setup process feels like more than you want to handle, payroll system setup is something you can get help with. Configuring everything correctly from the start prevents headaches later. A QuickBooks bookkeeper in Santa Fe who handles payroll regularly can get your system running and train you to manage it going forward.
Santa Fe's Small Business Bookkeeper
The Next Step:
A Quick Conversation
Tell us about your business and what you're dealing with. We'll listen, ask a few questions, and give you a straightforward quote.
More Questions
Do I need a local bookkeeper or can I work with someone remotely?
Most bookkeeping work can technically be done remotely with cloud accounting software. But local bookkeepers understand state-specific requirements like New Mexico's Gross Receipts Tax and are available for in-person meetings when complex issues come up.
Read answerWhat bookkeeping mistakes do landlords commonly make?
Landlords often commingle personal and rental funds, fail to track income and expenses by property, and misclassify repairs versus capital improvements. Security deposit handling and depreciation tracking also trip up many property owners.
Read answerHow do I track maintenance and repair costs by truck?
Use classes, tags, or locations in your accounting software to assign each maintenance expense to a specific truck. Capture the truck number, mileage, and repair type for every expense so you can run reports showing total costs per vehicle.
Read answerDo I need separate bookkeeping for each short-term rental?
It depends on your legal structure. If each property is in a separate LLC, yes. If they're all under one entity, you can use one set of books with class tracking to see each property's performance individually.
Read answerWhat expenses should owner-operators track?
Owner-operators should track fuel, maintenance, insurance, truck payments, permits, tolls, meals, equipment, and professional services. Missing expense categories means overpaying on taxes and not knowing your true cost per mile.
Read answerHow do I handle progress billing for construction projects?
Set up billing milestones tied to project phases or completion percentages in your contract. Invoice as each milestone is reached, track retainage separately, and record everything in your accounting system so you know exactly where each project stands financially.
Read answer
