NACHA File Format: What Accounts Payable Teams Actually Need to Know

NACHA File Format is a foreign concept for everyone, but it doesn’t mean impending complexity in accounts payable.

NACHA file format can be considered the key that unlocks ACH payments, and is used more and more as companies transition away from check payments.

While the benefits that ACH payments bring to the vendor payment process are clear and well-documented, there are still a lot that businesses don’t know about payment protocol driving the complex network known as NACHA that manages these electronic payments.

For accounts payable teams, the key things to understand are the role that NACHA file format plays in the accounts payable process and the best ways to facilitate payments with it.

What is NACHA file format?

A NACHA file is set of instructions that triggers a batch of ACH payments as soon as it is uploaded into a bank portal. NACHA file format is the protocol for structuring those instructions in a way that successfully initiates the payments.

The specific way that NACHA files are structured is less important for accounts payable teams to know, since they shouldn’t ever need to put one together. The process of actually assembling a NACHA file would be tedious, manual, and prone to human error. For this reason, many financial institutions automate the process for their customers.

In case you’re curious, this image depicts what a portion of a NACHA file looks like:

NACHA formatted file

What do accounts payable teams really need to know about NACHA File Format?

Accounts payable teams need to know that a NACHA file is the key to batch ACH payments, and NACHA file format is the protocol for setting it up. Beyond that, accounts payable teams do not need to know anything. The reason accounts payable teams do not need to know more details about the specifics of NACHA file format is a practical one:

NACHA files are very burdensome for accounts payable teams to assemble manually, and ultimately not worth the time or effort that is required.

Many financial institutions will provide you with software that automatically assembles NACHA files so you don’t need to think twice about setting up your payment batches. Popular ERPs also offer features that can generate NACHA files. These services are well worth utilizing because B2B payments are complex enough as it is.

Not only is accounts payable the most manual process left in accounting operations today, but it is also steeped with opportunity for error. Adding another point of human intervention will open up another avenue for errors to enter the vendor payment process upstream and turn your month-end close into a true nightmare.

What are the best ways to facilitate payments requiring NACHA file format?

If your bank or ERP doesn’t already provide you with a service that automates the assembly of NACHA files, you have options to choose from. However, not all of these options are created equally.

Accounts Payable (AP) Automation Software
AP Automation software is in the process of disrupting the accounting industry, and provides the most efficient way to process and pay your invoices via ACH transfer.

Rather than appending a payment solution on top of your current accounts payable process, AP Automation software streamlines your entire process by eliminating all of the most painful and time consuming points of manual intervention. Teams that implement AP Automation can see a 60% increase in efficiency.

In the payment step of the process, this software sends NACHA files directly to your bank for payment, and also records the payment into your accounting system through a bi-directional sync. Remittance details are also transmitted automatically.

Payment Automation Software
Payment Automation software is a viable method for following NACHA file format to execute batch ACH payments, but not optimal if you’re looking to solve the pain associated with the end-to-end AP process.

This type of software can be thought of as a “point solution” that automates one step in the lengthy accounts payable process. Most Payment Automation software operate similarly to the payment portion of AP Automation software, and will consolidate all of your different payment methods (check, ACH, credit card, wire, etc.) into a single electronic file.

This consolidation ultimately saves you time, enabling your to ensure you are paying each vendor with the payment method that is most advantageous to you.

To learn more about ACH payments, check out this article – B2B ACH Transfers: Everything Midmarket Businesses Need to Know.


We're transforming accounting by automating Accounts Payable and B2B Payments for mid-sized companies. Our award-winning solution has helped over one thousand businesses transform accounts payable from a source of inefficiency and fraud risk to a secure and strategic profit center that provides visibility into key cost drivers.