NACHA files

What is the NACHA file format?

Most banks don’t natively support their own ACH API, which means they require third-parties to send or upload the files to their banking portal. In that case, businesses take ACH payments that customers have sent, serialize the data using code formatted to NACHA specifications, and then send the files to the bank to begin initiating payments.

NACHA files (also called ACH files) are populated line by line, with each 94-character line corresponding to different payment data. The characters on each line include essential details about the payment, including the account number, routing number, and more. Each line serves a different purpose, which can be discerned from the character at the beginning of the line. In the example below, only one line starts with the number 1, which indicates that this line is the “file header record.” File header records begin “101.”

The total number of lines in a NACHA file must be divisible by 10; in the example, the file contains several lines of 9 to meet this requirement (a 9 indicates either file padding or a “file control record”). Other leading characters include 5 (“batch header record”), 6 (“entry detail record” or “payment record”), 7 (“addenda record"), and 8 (“batch control record” or “batch trailer”). NACHA’s primer on ACH files digs deeper into file records, as well as effective dates, transaction codes, and service class codes.

Other items of note in the example above are the “trace number,” which appears at the end of the second line and is unique to the payment (in this case, “021000020000000”). If there's any problem with the payment, the bank will ask for this number to track the issue. The NACHA file will also contain a Standard Entry Class Code (or SEC code). In the example, the code is CCD, which stands for “Corporate Credit or Debit,” and this code appears in the lines beginning with 5, the batch records.

Who uses NACHA files?

Businesses, financial institutions, and payment operations platforms like Modern Treasury originate NACHA files to help banks initiate batches of ACH payments.

ACH payments are also a cost-effective option for businesses managing high volumes of transactions. For this reason, employers often use NACHA files for payroll. For example, say you're an employer looking for a direct deposit solution that moves money into your employees’ accounts quickly. NACHA files help businesses disburse recurring payroll deposits in an organized, efficient way that gives them more control over the process—at a lower cost.

Are all NACHA files the same?

In the realm of ACH generally, and NACHA files specifically, payment initiation gets the most attention. In fact, the NACHA file format serves a number of different purposes and is extremely flexible. These files may notify you of an inbound payment or explain why a payment wasn’t successful, for example. From returns and reversals to prenotes, NACHA files are standard for a range of uses. Though the details of a payment file can vary depending on the bank or financial institution, SEC codes are always required when sending ACH payment files.

How do you create a NACHA file?

Simply put, your business can either create ACH files manually or get some assistance.

Large national banks like Wells Fargo and J.P. Morgan have their own payment API to originate NACHA files internally. While these files are particularly useful to banks, they aren’t intuitive for everyday users. In fact, the specification manual for creating NACHA files is over 700 pages long.

Open-source libraries are an option for the tech-savvy—it’s also possible to create NACHA files using ERPs like NetSuite, AP software like QuickBooks, and other third-party tools.

A platform like Modern Treasury can also help with the heavy lifting. Our payment operations solution can generate NACHA files for you, handling the full cycle of ACH money movement—from creating a payment order to reversals and returns. Reach out to learn more.