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ACH, EFT and eChecks: Which is Right for my Business?

ACH, EFT, eChecks

It should be easy to pay and get paid, right? After all, it’s the essential lifeline of companies. 

Wrong. The simplicity of receiving money for services and products, or paying for the necessities of your business, is a foolish pipe dream if you don’t have the right process. You have to understand what works for you. Which is kind of hard when people are cavalierly throwing the terms ACH, EFT, and eChecks around with no hint of explanation. 

Well, Bill.com is here to help! We’ll take you through what these payment types mean. And most importantly, why you should use them for online business payments.

First off, there’s some good news - on a fundamental level, all these terms mean the same thing. They reference deposits or payments that transfer from one bank account directly into another. The process functions like a check without paper. Since it is all electronic, the bill pay process is far quicker than traditional paper checks or even paying via credit card. And, when supported by cloud-based solutions, critical functions like bill payment become even easier.

Since Schoolhouse Rock! didn’t cover ACH, EFT, and eChecks in a catchy melody we’re going to have to do this the old-fashioned way.

ACH — Automated Clearing House. A vast electronic network for financial transactions 

The ACH Network is so large that in the first quarter of 2016, it handled more than 5 billion payments. Not to freak you out, but you’ve probably already used ACH, either for sending or receiving money. The best example is your highly anticipated tax return. Your glorious refund from the IRS landed directly in your bank account thanks to the ACH Network. And that time you had to pay Sharon back for the impromptu trip to Cabo? You sent a payment through your personal banking account – which was powered by none other than ACH.

EFT — Electronic Funds Transfer 

EFT is essentially the exact same process as ACH, but it also includes debit payments, wire transfers, and electronic bill payments that move money from one account to another. These payments are also processed through the ACH Network and can typically take 1-4 business days on average.

eChecks — An electronic payment funded by the buyer's bank account 

eChecks are yet another form of electronic payment. Oftentimes, the terms EFT and eChecks are used interchangeably in financial circles. Typically, an eCheck will take longer to process then its ACH counterpart. To break it down, it’s the difference between 3-6 days vs. 1-3 days.

Why Online Payments are Good for Your Business

Regardless of the type, paying electronically benefits your business.

But why? How am I supposed to take this in without an educational sing-along? We hear you, and thus have listed the benefits below: 

Going paperless. Since ACH, EFT, and eChecks are sent through an electronic payments system, there’s no need for paper. Invoices can be sent and approved digitally, and all records are kept through your banking or payments system ledger.

Less costly. In addition to helping your business save on paper, electronic payments can also save you money on transactional fees. Typically, ACH/EFT processors charge a flat rate which can range from $0.25 to $0.75 per transaction while others charge a flat percentage fee—like PayPal’s 2.9% fee (yikes!).

Improved cash flow. Because paying electronically sends and tracks transactions in real-time. The long process of reconciling payments associated with paper checks or credit cards is completely eliminated. Since payment is transferred from your banking account to the recipient’s banking account, the debit is reflected almost immediately.

Keeps your vendors happy. They get paid on-time and electronically, reducing the standard time frame associated with sending a paper invoice and approving and mailing a paper check.

Elevated efficiency of the bill pay process. When you utilize a cloud-based accounts payable solution you get bonus features. Including the ability to automate the approval process. Imagine bills flowing smoothly through approvers and on to payment, even sending automatic reminders to those pesky “approval” lollygaggers. With a cloud-based solution you can store associated documents online and entirely eliminate paper.

ACH, EFT, and eChecks easily bring more transparency and efficiency to your bill pay process and will no doubt enhance your business life.

June 19, 2018
Kate Wilson
Social Media Manager, Bill.com
Kate is in charge of all things social at Bill.com. When she's not writing every type of content imaginable, she's drinking strong coffee and debating the use of the Oxford comma with her coworkers.