NACHA Compliance | How to Validate ACH Files!
Categories: NACHA File Validation
Categories: NACHA File Validation
As electronic payments continue to rise, NACHA compliance has become mission-critical for every organization that Initiates or Processes ACH Transactions. Whether you’re a payroll provider, billing company, insurance carrier, bank, lender, fintech platform, or SaaS application—ensuring that your ACH files are validated correctly before submission protects your business from returns, penalties, and costly operational disruptions.
At AchGenie, we have spent years developing advanced ACH processing and Validation infrastructure that enables financial institutions, enterprises, and SaaS platforms to maintain error-free payment operations. This guide provides a complete, expert-level breakdown of how to validate ACH files for full NACHA compliance—based on real-world experience processing millions of ACH transactions.
NACHA (the National Automated Clearing House Association) establishes the rules that govern the U.S. ACH network. These rules ensure that every transaction—whether payroll, government benefits, vendor payments, consumer debits, or insurance payouts—flows through the banking system accurately and securely.
Validating ACH files before submission is not optional—it is essential.
Before validating transaction data, the file’s structure must strictly follow NACHA formatting. ACH files use fixed-width records—meaning each line must contain exactly 94 characters.
Even a single missing space can result in file rejection.
| Record Type | NACHA Code | Function (Purpose) | Key Validation Focus |
| File Header | 1 | Identifies origin/destination and file metadata. | Correct Format Date, Immediate Destination (ODFI Routing), and required literals (e.g., Record Size ‘094’). |
| Batch Header | 5 | Defines the service class and the SEC Code (PPD, CCD, WEB). | Service Class Code (e.g., 200/220) and Effective Entry Date. |
| Entry Detail | 6 | Contains individual debit/credit transactions. | Transaction Code, Receiving DFI ID (Routing Number), and Amount. |
| Addenda | 7 | Supplemental transaction details (optional per SEC). | Matches the Addenda Record Indicator in the Entry Detail (6) record. |
| Batch Control | 8 | Contains control totals for the preceding batch. | Batch Total Debit/Credit Amounts and Entry Hash must exactly match the sum of entries. |
| File Control | 9 | File-wide control totals and reconciliation. | Batch Count, Block Count, and File Total Amounts must exactly match the sums of all Control (8) records. |
Common structural errors—such as inaccurate totals, lowercase characters, or incorrect spacing—cause immediate ODFI rejection.
Once structural integrity is confirmed, validate all data within the file. This prevents fraud, returns, and unauthorized transactions.
Each Entry Detail record includes the Receiving DFI Identification (routing number). Validate it using two methods:
NACHA uses a mathematical formula to verify routing number integrity. If the check digit fails, the routing number is invalid—no exceptions.
Verify the number against the official ABA Routing Number Database to ensure:
This eliminates the majority of avoidable payment failures.
NACHA does not require account validation for all SEC codes, but it is considered a best practice and dramatically reduces unauthorized returns.
Effective methods include:
This is especially critical for WEB transactions, where fraud risk is significantly higher.
Each SEC code requires a specific type of customer authorization.
| SEC Code | Authorization Requirement | Key Compliance Note | |
| PPD (Prearranged Payment/Deposit) | Must have a written or readily identifiable electronic record of consumer authorization. | Used for recurring consumer payments (e.g., utility bills). | |
| CCD (Corporate Credit/Debit) | Requires a corporate authorization agreement between the parties. | Used for business-to-business (B2B) transactions. | |
| WEB (Internet-Initiated) | Online authorization and mandatory implementation of a “commercially reasonable” fraud screening system. | Highest scrutiny due to higher risk (often used for one-time online payments). | |
| TEL (Telephone-Initiated) | Must be an audio voice recording or a written confirmation of the oral authorization. | Requires strict adherence to disclosure and recording rules. |
Businesses must retain authorization records for at least two years after any revocation request.
NACHA requires organizations to protect all “Protected Information,” including routing and account numbers.
These requirements are part of the NACHA Security Framework and are not optional.
Manual file validation is inefficient and error-prone. Most organizations use Automated Validation Tools or platforms like AchGenie, which deliver:
If your business processes more than a few ACH batches per month, automated validation is essential—not just convenient.
✔ All records are exactly 94 characters
✔ Batch and file control totals reconcile
✔ Routing numbers validated (modulus-10 + ABA directory)
✔ Authorization on file for every transaction
✔ WEB debits pass mandatory fraud screening
✔ ACH file transmitted securely (SFTP/HTTPS)
✔ Account Verification Completed (recommended)
✔ Appropriate SEC codes used (PPD, CCD, WEB, TEL, CTX, etc.)
This checklist will help you eliminate over 90% of common ACH errors.
Your ODFI will rejectooo the file, delaying payments and exposing your organization to risk.
NACHA releases updates annually, with occasional mid-year revisions.
Not for every SEC code—but it is highly recommended for high-risk transactions (especially WEB).
Yes—if they are encrypted and access-controlled per NACHA requirements.
Incorrect formatting (usually record length or control totals).
Validating ACH files for NACHA compliance is not just a technical necessity—it is a fundamental safeguard for your organization’s financial operations. By implementing structured validation, securing sensitive data, and leveraging automated tools like AchGenie, businesses can dramatically reduce fraud, eliminate errors, and ensure smooth, compliant ACH processing.
A robust NACHA validation workflow is one of the most valuable investments you can make in your payment infrastructure.
