ACH becoming preferred mode of paying dividends

Dividend of shareholders for many companies are now paid directly to the bank account of the shareholder. This follows the use of Automated Clearing House (ACH), which is fast becoming the preferred way of paying dividends and other such bulk and recurring payments.

ACH is an electronic system of transferring money from one bank account to another that is faster and more secure. It is normally used for bulk payments such as salaries, commissions and dividends among others. It was introduced by Ghana Interbank Payment and Settlement Systems (GhIPSS) as part of its vision to migrate Ghana into an electronic payment society.

Previously, dividends were largely paid through cheques which were sent through postal addresses to shareholders. Besides the delay associated with the postal system, many minority shareholders do not bother to cash those cheques because the number of shares they hold might not make the amount of money paid as dividend significant enough to pursue at the banks.

But with payment of dividends through ACH, shareholders will have their bank accounts credited with the amount due them.

Speaking in an interview, the Head of Clearing at GhIPSS, Akosu Blay, said the use of ACH to pay dividends makes a rather cumbersome process simpler and quicker. She explained that paying banks will no longer need to incur additional cost to distribute cheques to postal boxes of shareholders, but instead each shareholder will be paid electronically.

There have been several instances where shareholders and their companies have disagreed over the payment of dividends, with companies insisting that they have paid while shareholders claim not to have received the cheques. With the use of ACH, however, Mrs. Blay said the transaction will provide audit trails that will serve as evidence of payments and receipts of the money, to clear any form of doubts.

More than 13 companies used ACH to pay the latest dividends and several other companies are expected to do the same. Mrs. Blay urged other companies to follow suit, to ensure that their shareholders receive their dividend on time with little or no hassle.

The Head of Clearing is also of the view that this prompt payment of dividends via ACH could further deepen people’s interest in owning shares.

“You’re not likely to present a cheque worth 2 cedis, but 2 cedis worth of dividend from different companies over time could be a lot of money. ACH will pay that 2 cedis, 1 cedi or even 30 pesewas into your accounts, and cumulatively it could be some good money,” she said. “So instead of throwing away those cheques you consider insignificant and over time lose interest in owning shares, you will get it all paid into your accounts; this is something minority shareholders will value,” Mrs. Blay added.

Mrs. Blay also urged institutions that make bulk and recurring payments to speak to their bankers to use ACH and enjoy the benefits of an electronic payment system.