Blog|4 min

What is an ACH withdrawal?

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

In a nutshell, an ACH withdrawal is an electronic transaction that pulls funding from one financial account and places it in another.

The letters "ACH" stand for Automated Clearing House, a secure network of banks in the United States, including the Federal Reserve, that allows fast, easy payments between parties, even if you don’t share the same financial institution. 

Used for everything from insurance premiums to tax refunds, the ACH network can let your own business send and receive payments just as easily.

This article will explain: 

  • What an ACH withdrawal is and how it works

  • What an ACH direct deposit is and how it works

  • The pros and cons of using ACH withdrawals and direct deposits

  • How your business can use them to send and receive fast, easy payments

How does ACH withdrawal work?

In most cases, companies use ACH withdrawals to accept payments from clients or customers for products and services—whether those customers are businesses or individual people. 

Here's how it works.

The customer gives the biller authorization to pull funds directly from their banking account, often a checking account. Once approved, each charge and payment is debited and credited automatically.

These electronic payments are pulled into the ACH network, batched together, processed by the clearer, routed to your account, and deposited.

The costs of ACH transactions are extremely reasonable, much lower than the fees charged by credit cards, and the service benefits both the business and the consumer:

  • The business gets its recurring payments without any manual work by the accounting or finance departments

  • The customer transfers those payments automatically, meeting their payment terms and avoiding late fees

Many types of business offer the option to pay by ACH—utilities companies, mortgage lenders, banks offering loans, and any other business that takes recurring payments.

How do ACH and direct deposit work?

Direct deposits are initiated by the person or company making the payments. In other words, instead of pulling money in, they push money out.

For example, the U.S. government makes social security payments and offers electronic tax refunds through direct deposit.

ACH direct deposits can be either one-time or recurring payments, depending on what's needed. A business might deposit monthly employee paychecks directly into personal checking accounts. Or it might issue individual payments to corporate merchants as a matter of convenience.

Either way, the process is similar to an ACH withdrawal. The person getting paid provides their banking information and approves the transfer. The sender makes the timely payment automatically.

How to make an ACH withdrawal

Making an ACH withdrawal or deposit will require:

  • Prior authorization

  • Detailed bank account information exchange

  • Rules and terms of payment

  • A financial institution or ACH provider

Fortunately, Bill.com can make this process easy and convenient while keeping your bank account numbers private.

ACH withdrawal: pros and cons

Overseen by the National Automated Clearing House Association (NACHA), the ACH network moves trillions of dollars in electronic funds transfers every year.

If you want to transfer funds electronically within the U.S., ACH transactions are secure, fast, and convenient, and they have very few limitations:

  • ACH payments are not always available internationally

  • Standard ACH payments take 2-5 business days to clear

  • Same-day payments have a limit of $100,000

For larger same-day payments and international payments, funds are usually sent by wire transfer. (If you need to send international wire transfers, Bill.com does that too—with no wire transfer fee* for payments to vendors in local currencies.)

Bill.com difference

Bill.com lets you connect to vendors and customers through the ACH network. When you connect through Bill.com, you each provide your own routing numbers and other banking information.

You enter your info, and they enter theirs. Your accounts are connected through the system and your information stays private.

The Bill.com business payments solution offers several alternative payment options. Use ACH payments with your linked vendors, or send virtual card payments, international wire transfers, or paper checks. They’re all available from the same easy-to-use dashboard.

No matter how you pay or get paid, your banking information is protected. 

But that’s not the only advantage. Bill.com makes your AP fast, easy, and transparent. Our cloud-based system gives you remote access to expense approvals, invoices, notice of payment, and all your AP documents and communication in one organized place.

It also integrates with major business accounting software, including QuickBooks, Sage Intacct, Oracle NetSuite, and Xero. Schedule payments in advance or approve them individually through your own custom workflows. From invoice to payment, your books stay up to date automatically.

By automating and streamlining the AP process, Bill.com customers reported saving on average 50% of their AP time.

Want to learn more? Get started and see for yourself, or request a demo with one of our product experts.

Case Study / Quote about ACH Payment Processing  by Bill.com

“Prior to implementing Bill.com, the AHS team spent almost a week each month processing paper, matching each of the invoices to a single check. Now the process takes just one hour in addition to dramatically reducing the time the CFO spends in the approval and signing of checks.” — Diana Westrop, Controller, Atlanta Humane Society


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