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What is a Settlement Date ?

SETTLEMENT DATE – The day on which settlement occurs, i.e., funds actually change hands as a result of an ACH entry.

How ACH Funds Are Settled 

Settlement is the actual transfer of funds for ACH entries between financial institutions provided by the Federal Reserve Bank. The net debit and credit positions of financial institutions are calculated and posted to the reserve accounts of financial institutions (or to the account of their correspondent).

The timing of settlement is based upon the effective entry date indicated on the ACH file and the time of its delivery to the ACH Operator. ACH debits may be delivered to the ACH Operator no earlier than one banking day prior to the settlement date. ACH credits may be delivered no earlier than two banking days prior to the settlement date.

When the ACH Operator processes an ACH file, the effective entry date is read and entries are settled according to that date. If the ACH Operator cannot settle on the effective entry date due to untimely file delivery, a stale date, weekend, or holiday, the ACH Operator will apply a settlement date of the next business day.

ACH Reversals

Overview

Once an entry has been introduced into the ACH system, it cannot be recalled, but an erroneous or duplicate entry can be reversed.

An originator can initiate the reversal within 5 banking days of the settlement date.

ACH Universal

ACH Universal will automatically enter the word ‘REVERSAL’ into the company entry description field of the batch header record.

How do I enter Debits and Credits?

If your original (erroneous) entry was a debit, you should now enter it as a credit (and vice versa).  Marking the record as a reversal does not alter the debit/credit or the sign in any way.

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