How US bank holidays affect payment processing

Payment processing is critical for business owners and operators across all industries, but it comes to a halt on US bank holidays. That's why it's worth identifying which days banks are closed and learning how to prepare for the temporary pause.

Federal holidays

There are 10 commonly observed bank holidays, which are also federal holidays.

• New Year's Day: January 1
• Martin Luther King Jr. Day: Third Monday of January
• Presidents Day: Third Monday of February
• Memorial Day: Last Monday of May
• Independence Day: July 4
• Labor Day: First Monday of September
• Columbus Day: Second Monday of October
• Veterans Day: November 11
• Thanksgiving Day: Fourth Thursday of November
• Christmas Day: December 25

Notably, some banks may not be open on days near a holiday. For example, they may close on the Saturday before a holiday that falls on a Monday. Others may stay open on certain holidays, but that doesn't mean it's business as usual. They may have shortened hours, limited staff or unable to process transfers with other banks.

Account for delays in regular activities

Today, many businesses rely on electronic bank-to-bank transactions processed through the Automated Clearing House, or ACH, network. If you pay employees via direct deposit, the funds go through the ACH. So do payments you withdraw from customers' bank accounts with their permission. Also, payments you make through your bank's online bill pay also travel through the ACH network.

The Federal Reserve System is involved in the process, and the ACH network can only settle payments when the country's central bank is open. It's closed on federal holidays and weekends. So, do ACH payments post on holidays? The answer is no. Rather, they're usually delayed one business day.

Banks don't typically process checks on holidays either, so it will likely take longer to access those funds, as well.

Be proactive

By planning, you can avoid any interruptions in your business's operations and payment processing due to bank holidays. Here are some steps you can take when bank closures are approaching.

• If a holiday coincides with payday or falls during the payroll processing window, run payroll early if you don't want direct deposits of paychecks to be late. Otherwise, inform employees there will be a delay so they can plan for it.
• Given the lag in payment processing, make necessary adjustments to account for temporary changes in cash inflows.
• Be mindful of holidays when scheduling online payments to your suppliers, lenders and others to ensure your bills are paid on time.

With good planning, your business can continue to meet its financial obligations even on days that banks observe designated holidays. Talk to your business banker about any steps you should take in advance of upcoming US bank holidays. This will help ensure your financial operations continue without issue and your cash flow remains uninterrupted.