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How to set up payroll direct deposit

You can easily set up payroll direct deposit in QuickBooks Online. After you do the initial set up you can set up each employee on direct deposit and also verify your test transaction.

Here are some things to take note of about direct deposit:

  • You must approve pay cheques that are being paid through direct deposit by at least 5 pm PST, two banking days before the pay date.
  • It can take up to three days to complete the Risk Analysis after initial set up.
  • Double check that all account numbers and information are correct. Incorrect information can cause a delay or result in funds not being sent to an employee.
  • A best practice is to begin direct deposit set up the day after running a payroll with paper cheques to ensure you are not in a ‘Pending’ state when it’s time to run your next payroll. Direct deposit set up and verification can sometimes take up to a week.
  • The Principal Officer is the owner of the bank account being set up for direct deposit.
  • Email communications for direct deposit will be sent to the Master Administrator (MMA) on file, but the AML/OFAC email and the verify bank account email will go to both the Principal Officer (bank owner) & the MMA.
  • Most companies will receive an AML/OFAC email from requesting proof of identification and more info. The Principal Officer must respond to this email with the appropriate documentation prior to using direct deposit and it can take up to two business days to approve once the ID is submitted.
Note: Review the direct deposit processing timeline for information on how long the direct deposit process will take once you've submitted payroll.

Direct deposit initial set up

Here's how to initially set up the direct deposit:

  1. Select the Settings ⚙️ icon, then Payroll Settings.
  2. Under Payroll, select Direct Deposit.
  3. Review what you'll need to set up direct deposit and select Yes! Let's get started.
  4. Fill in required fields for Employer Bank Account and Account's Principal Officer. 
  5. Select Continue.
  6. You'll receive a confirmation email from prompting you to verify your information. Once the information is verified, you'll receive another email confirming your pre-authorized debits.

Verify a test transaction direct deposit

After you do the initial set up you need to verify a direct deposit test transaction. In 2-3 business days, a small debit of less than $1.00 (CAD) will be taken from your account as a test. To verify this amount:

  1. Select the Settings ⚙️ icon, then Payroll Settings.
  2. Under Payroll, select Direct Deposit.
  3. Select Verfiy Test Transaction. (Note: This option will not be available until the test amount has been debited.)
  4. Enter the test transaction amount in both boxes (less than $1.00). Enter the pennies only, without a dollar sign. (i.e. .47)
  5. Select Ok.
  6. After successful verification, you're ready to set up employees!

If you don't see this transaction within three business days of entering direct deposit information in to your Payroll Settings, there are steps you can take to re-trigger the test transaction. To do this:

  1. Select the Settings ⚙️ icon, then Payroll Settings.
  2. Under Payroll, select Direct Deposit.
  3. Select Yes! Let't get started.
  4. Select the Edit button next to the Bank Account field.
  5. Input the following number sequence into the bank account field: 123456789.
  6. Select Save and close.
  7. Immediately go back into your Payroll Settings from the Gear icon and select Direct Deposit.
  8. Select the Edit button next to the Bank Account field.
  9. Re-enter the correct bank account number and save the changes.
  10. This should re-trigger QuickBooks Online to send the test transaction to your bank. Please wait another three business days for the transaction to appear on your bank account.
Note: You have three attempts to verify your test transaction. If you aren't successful, contact us for assistance.

Set up each employee on direct deposit

After your direct deposit test transaction has been verified, you're ready to set up each employee:

  1. Ensure the employee has properly filled out the Direct Deposit Authorization Form.
  2. Once you've completed the initial set up your direct deposit settings screen will look like this. Select Set Up beside the desired employee. Set up each employee on direct deposit_QBO_CA_Ext_10272021.png
  3. From the What do you use to pay Employee? dropdown arrow, choose Direct Deposit.
  4. Fill in the fields using the information from the employee's authorization form.
  5. Select Ok.
  6. This completes the set up process and you're now ready to use direct deposit to pay your employees.

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