Why Property Managers Should Know About Nacha

Summary:

Jordan Bennett is from the National Automated Clearinghouse Association, which is most easily identifiable to us as ACH. We’re talking about the role of the association and why it’s necessary to follow the carefully curated best practices that they’ve put together.

Property management companies are often third-party senders, since you collect rent and pay it to your owners.property

We asked Jordan to join us on The Property Management Show to talk about how Nacha affects property management companies and what you need to know.

Key Takeaways:

* Nacha is the National Automated Clearinghouse Association, which oversees the ACH Network, the backbone for the electronic movement of money and data in the U.S.

* Property managers have responsibilities and can be held liable as third-party senders.

* Property managers can undergo Nacha Certification, which establishes them as a trustworthy company that has taken steps to ensure money is handled correctly.

Understanding the National Automated Clearinghouse Association

Nacha essentially manages the ACH network.

The association makes the rules and educates all participants. When property managers collect rent from tenants and pay that rent to owners, it means they’re participating. There are responsibilities that come with that participation, and understanding the different roles will help keep everyone happy.

Nacha has direct members, which are banks and other financial institutions.

There are also third-party senders, and those are payment providers. Most property managers fall into this classification. Nacha has rules in place that benefit everyone who participates. They help banks work with third-party senders. They maintain the high level of trust that’s necessary when payments are made and received electronically. The money has to continue flowing properly.

All of the direct members and third party senders on the ACH network are subject to the large rulebook that Nacha keeps to detail and interpret all the rules. They can break down what each rule means and how they are defined.

Property Management Companies as Third-Party Senders

Property managers wear many hats. Being a payment provider or a third-party sender in the ACH network is only one of your roles. You probably don’t give it a lot of thought. But, you need the protections that are in place when your tenant originates a payment and that money comes to you and then you pay your owners using your own financial institution. You expect things to go smoothly – but will they always?

Many property management companies handle their rent collections and disbursements through their property management software. This doesn’t release you from the responsibilities of a third-party sender, however. You’re still the one collecting account numbers and routing numbers and banking information.

If you’re collecting rent and paying owners without involving your own bank, the property management software would qualify as the third-party sender. But most property management companies do have money moving in and out of their accounts.

The flow of payments is your responsibility.

What Can Happen During the Payment Flow?

Something that has happened more than once is a property management company going bankrupt. If tenants pay rent before the property management declares bankruptcy but those rents aren’t paid to the owners because of the bankruptcy, there’s going to be a wild disconnect.

The funds will be held in different ways depending on the bankruptcy laws in your state. The ACH rules are in place to protect the incomplete transaction. There will be a lot of owners who are upset and a lot of tenants who are insisting they did pay their rent, and the commotion will be messy. Consumers – or tenants and owners – are not going to know the ACH process.