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What is ACH Debit?

Kelly Kipkalov
Bill.com, Sr. Director, SMB Product Marketing

ACH debits are electronic payments made through the ACH network, or Automated Clearing House network. 

Governed and operated by the National Automated Clearing House Association (NACHA) and including the Federal Reserve, the ACH network is a secure, trusted way to make direct payments from one financial institution to another, transferring funds electronically between accounts.

Payments require prior authorization and are processed in batches automatically. An ACH transaction usually takes 2-5 business days to clear, but same-day ACH payments are also available, clearing in just a few hours.

ACH payments can be either ACH debits or ACH credits, but you won't see either of those terms used very often. An ACH credit is "pushed" from one account to another. In other words, it's initiated by the party that's making the payment.

An ACH debit transaction, on the other hand, is "pulled" from the bank account that's being paid. That is, an ACH debit is initiated by the payee—the party that will receive the funding. 

This article will walk through the various types of ACH debits, the most common related terms, and the benefits of using both ACH debits and ACH credits for your business.

What are the different types of ACH debit?

Because an ACH debit is initiated by the payee and pulls funds into their own account, it's often used by consumer businesses to collect money they're owed. Companies often use terms like "autopay" or "ACH" rather than "ACH debit."

These kinds of payments are extremely common. Businesses use them to collect:

  • Recurring customer fees or charges

  • Mortgage payments

  • Payments on car loans

  • Utilities costs

Customers have to provide their information, including routing and bank account numbers, and they have to agree to be billed via ACH debit. They're willing to provide that authorization because they see it as a secure service that lets them pay automatically, usually via transfers from their checking or savings account, without the need for credit cards and without risking late fees.

The benefits to a business are obvious. They can charge customers and receive recurring payments without having to wait for the sender. Funds are debited and credited automatically and deposited in their account through timely payments of electronic funds. Companies can protect their income while reducing the potential expense of collecting late or missed payments.

ACH debit vs. eCheck: What is the difference?

Technically an eCheck is the same thing as an ACH debit, but the term is often used loosely. Almost any electronic funds transfer might be called an "eCheck" no matter who’s sending or receiving it. For example, electronic transfers can be batched through the ACH system, but they can also be sent by wire transfer.

The original meaning of "eCheck," short for "electronic check," has changed over time, so don't assume someone specifically means an ACH debit when they're talking about an "eCheck."

ACH debit vs. direct deposit: What is the difference?

"Direct deposit" is another term for an ACH credit. In contrast to the examples of ACH debits listed above, ACH credits or direct deposits are initiated by the source of the payment. They're often used by the U.S. government for both one-time and monthly recurring payments, such as tax refunds and social security payments.

In addition, direct deposit is used by companies to pay workers, merchants, marketing agencies, and more as a matter of convenience.

An employer can deposit paychecks directly into its employee's personal checking account without having to issue a paper check. It might also pay for a purchase of goods or services the same way. These payments are fast, simple, easy, and inexpensive, with very low transaction fees, moving between checking accounts without the need for paper.

Why use Bill.com for ACH payments?

ACH payments can save your business both time and money, and they're more secure than paper checks. But choosing Bill.com as your intelligent bill pay solution comes with a considerable number of advantages and benefits that go far beyond ACH service.

Bill.com offers several convenient payment methods from the same friendly, easy-to-use dashboard. Pay by virtual card, ACH, or international wire with just a few clicks. You can even pay by paper check when you need to and Bill.com will print and mail it for you.

No matter how you pay, your organization's banking info is hidden. When you want to connect to a vendor for ACH payments, the initial verification process is handled separately on each side. You enter your information on your end, and they enter their information on their end, keeping things separate for both parties. The two accounts are linked without any information interchange.

Once connected, vendors can send invoices directly by email. Our Intelligent Virtual Assistant (IVA) goes to work automatically, reading the invoice and entering payment details. After you've reviewed IVA's work, Bill.com will route that invoice according to your approval workflows. Create as many workflows as you need. Bill.com will remember them and apply them automatically, maintaining your financial controls and reducing the risk of human errors.

Of course, every company still has a handful of vendors that insist on mailing paper invoices. When one of those comes in, just snap a photo of it on your phone and use our app to upload it. The invoice is filed digitally just like every other invoice in the system and handled the same way.

Check on the status of an invoice or bill at any time, from anywhere. If there are questions, for example about the amounts due, users can exchange those messages right inside the software. Every individual touchpoint is tracked, logged into a detailed, time-stamped audit trail, and stored digitally with the invoice itself.

Each related document, question, dispute, and decision is stored in the cloud where it can be accessed remotely. Use our website on your computer, or use our mobile app on your smartphone. Work seamlessly from work, home, or anywhere else.

Look up billing statements and payment status. Request approvals. Set up operating rules for automated payments to streamline your AP systems while maintaining corporate compliance guidelines. Everything is automatically synced with your accounting software for an easy close at the end of each cycle.

In fact, Bill.com customers have reported saving on average 50% of their AP time.

Set up ACH payments in Bill.com today with our risk-free trial.

"Bill.com helps us efficiently manage large volumes of payments in a controlled environment - which our auditors love! Our vendors appreciate the ability to securely provide banking details through a PCI compliant platform." — Kassie Hargurth, Head of Accounting, ClearCover


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