Why have an ABA Clearing Account?

I am starting a new company. Previous companies had ABA Clearing Accounts, but is there some reason that online payments can't just come directly out of the Bank account instead, saving having to do a transfer after each payment?

I notice in the previous company that in the Banking Preferences that Open Enter Payroll is set up as ABA Clearing & Open Pay Payroll Liab. is set up as Cash at Bank account. Not sure what these do.

Comments

Zappy

Nope. I dont have a clearing account. Its not mandatory

Big Hat

You may find it easier for reconciling uploaded files

Natalie_7017696

I have a clearing account so that when I upload a payment to the bank with say 25 different accounts I don't want 25 different entries showing in my reconciliation. I only want one (which is what you bank statement will show).

DebonAir

Natalie is correct. The clearing account will make reconciling your bank a very simple and easy procedure. If you don't use a clearing account you may find you can take hours and hours to reconcile if something is missing or incorrectly entered. More so if you reconcile only once a month.

Zappy

Perhaps its because i reconcile every day i never face this issue. Ive always done this. How does a clearing account help exactly?

DebonAir

I think that question was answered. I also reconcile daily and still use the clearing account.
Do what ever suits you best.

Lorelle Taylor

Thanks for that. So what do you have in the Banking Preferences for the Default Accounts to Use?

DebonAir

I have the clearing account set for all of my bills to be paid with an ABA file. All super and wages are also paid from the clearing account, as they are also showing as a single transaction on my bank account. It certainly does make life easier, especially after returning from holidays and backtracking a huge pile of work.