R23 Return Code: Dealing with “Credit Entry Refused by Receiver” in ACH Processing

Introduction

ACH transactions are widely used for both debit and credit payments, offering businesses and individuals a secure and efficient way to transfer funds. However, sometimes an ACH credit entry is refused by the recipient, triggering the R23 return code.

The R23 return code occurs when the receiver declines an ACH credit payment. This could be due to a variety of reasons, such as the recipient preferring a different payment method, a closed account, or concerns over unauthorized funds.

This blog will explain why R23 errors happen, how to resolve them, and best practices to prevent credit entry refusals in ACH transactions.

What the R23 Return Code Means and When It Occurs

The R23 return code indicates that the recipient (account holder) has refused to accept an ACH credit entry into their account. This can happen for various reasons, including incorrect payment setup, miscommunication, or recipient policies.

Common Reasons for R23 Return Code Errors

• The Receiver Prefers a Different Payment Method: The recipient may reject the ACH credit in favor of receiving payments via wire transfer, check, or another method.

• The Receiver’s Account Was Closed or Changed: If the recipient’s bank account is no longer active, they may refuse the credit entry.

• The Payment Was Unexpected or Unauthorized: Some account holders reject ACH credits they do not recognize, even if the payment is legitimate.

• Corporate Policy Restrictions: Businesses and organizations may have internal policies that prohibit receiving ACH credits from certain sources.

• Duplicate Payments or Incorrect Amounts: The recipient may reject the payment because they already received the funds or the amount was incorrect.

Example Scenario

A company issues a vendor payment via ACH credit, but the payment is returned with an R23 code. Upon investigation, the vendor explains that they prefer to receive payments via check instead of ACH, leading to the rejection.

How to Resolve an ACH Return When a Receiver Rejects a Payment

When an ACH transaction is returned with an R23 error, businesses must determine why the payment was rejected and find a resolution to successfully complete the transaction.

Steps to Fix R23 Return Code Errors

1. Contact the Receiver to Confirm the Issue

• Reach out to the recipient to determine why they refused the ACH credit.

• Ask if they prefer a different payment method or if there was an issue with the transaction details.

2. Verify the Receiver’s Account Information

• Ensure that the recipient’s bank account is still active and can accept ACH credit transactions.

• If the account was recently closed or changed, request updated banking details.

3. Confirm Payment Preferences with the Receiver

• If the receiver prefers a different payment method, work with them to determine the best option (check, wire transfer, etc.).

• Some companies require pre-approval before accepting ACH credits—ensure you follow their payment policies.

4. Correct and Resend the ACH Credit (If Applicable)

• If the receiver rejected the payment due to an incorrect amount or duplicate entry, correct the issue and resubmit the transaction with accurate details.

• Ensure that the receiver has authorized the payment before reattempting the ACH credit.

5. Offer Alternative Payment Methods

• If the recipient no longer accepts ACH payments, provide alternative payment options such as:

  • Wire transfers

  • Paper checks

  • Online payment platforms

6. Document the Return Code for Compliance and Tracking

• Keep a record of R23 return codes for financial tracking and internal compliance.

• If recurring payments are involved, ensure future transactions follow the receiver’s payment preferences.

Best Practices to Reduce R23 Return Codes in ACH Transactions

To minimize R23 errors and avoid payment refusals, businesses should establish clear payment agreements and verification procedures before sending ACH credits.

Best Practices to Prevent R23 Return Code Errors

1. Confirm Payment Preferences Before Sending ACH Credits

• Ask new vendors, employees, or customers how they prefer to receive payments before initiating ACH transfers.

• If ACH credits are the primary method, ensure they formally approve ACH as their payment preference.

2. Verify Bank Account Details in Advance

• Use bank account validation services to confirm that the recipient’s account is active and capable of accepting ACH credit transactions.

• Some accounts do not allow incoming ACH credits, so verification can prevent unnecessary return codes.

3. Send Payment Notifications to the Receiver

• Inform the recipient before processing an ACH credit, especially if it is their first time receiving an ACH payment from your business.

• This reduces the chance of unexpected payments being rejected due to lack of recognition.

4. Avoid Duplicate or Incorrect Payments

• Double-check payment amounts and transaction details before processing ACH credits.

• Ensure that a payment has not already been made to prevent the recipient from rejecting a duplicate entry.

5. Leverage Profituity’s PlatformNext for Payment Management

Profituity’s PlatformNext helps businesses reduce ACH errors like R23 by offering:

• Automated account verification before processing ACH credits.

• Pre-transaction notifications to ensure recipients are aware of incoming payments.

• Seamless ACH payment tracking to monitor transactions and prevent rejection issues.

How Profituity’s PlatformNext Helps Reduce R23 Return Codes

Profituity’s PlatformNext provides businesses with ACH processing solutions that help prevent payment refusals and improve credit transaction success rates.

• Automated Account & Payment Verification: Ensures the recipient’s bank account can accept ACH credits before processing.

• Pre-Payment Notifications: Alerts recipients about upcoming ACH credit transactions to avoid unexpected rejections.

• Real-Time Payment Monitoring: Tracks ACH credit payments and detects potential issues before submission.

• Seamless ACH Workflow Integration: Helps businesses optimize payment processes and prevent return codes.

Schedule a demo today to see how Profituity’s PlatformNext can help you eliminate R23 return code issues and enhance your ACH credit payment process.