What’s ACH and Why Should You Care?

What's ACH

ACH transfer. It’s yet another set of letters related to online business payments. But what does the abbreviation mean?

Abrupt Coin Habit.

No, wait.

Awesome Cash Here.

Getting warmer.

Automated Clearing House.

BINGO! Wait—can we go back to Awesome Cash Here?

Because that’s kind of what it is.

ACH provides an electronic network for ePayments that moved $43 trillion and 25 billion transactions in 2016 alone. Its system transfers money from your customers’ bank accounts (with their permission, of course) and deposits it into yours—no fuss, no muss, and no bank runs.

It’s basically online check payments. It offers a digital way to pay that’s quick, efficient, and cost-effective. ACH transfers also take the form of direct deposits, a preferred way to pay employees and contractors.

Basically, if you want to pay and get paid faster, you’ll want to know more.

1. ACH as a payment solution is great for your cash flow.

When you pay with a credit card or paper check, it can take anywhere between a week to 30 days for that payment to actually leave your bank account. In the meantime, you’re juggling cash flow and trying to remember what will hit when.

With an ACH transfer, the debit is reflected on your account immediately. There’s no guessing game. You can schedule ACH transfers for specific dates or as recurring payments so you know exactly when that payment will hit.

AR loves ACH payments. Your customers authorize your company to deduct an amount from their bank account. Within a day or two, that money lands in your organization’s account. You don’t have to wait for them to mail a paper check or hassle them to pay.

The best ACH scenario revolves around recurring customer payments. On a set date, your business will automatically have customer payments in your account. It’s perfect for your cash flow.

2. ACH transfers are easy on the wallet.

When compared to other means of payments, ACHs are gentle on the budget.

Credit cards charge you to use them—either you pay in transaction processing fees if you’re collecting money or you risk interest rates if you use them for payments.

Paper checks cost the most to use when you factor in the time, supplies, and bank fees. While an ACH payment can run you 49 cents, a check costs $5 or more to get out the door. If you process 20 checks a month, you’re out $1200 a year. If you went the route of ACH payments, it’d cost about $118.

3. Customers like ACH transfers.

ACH payments are secure and convenient. Customers are familiar with them. They use them for regular transactions such as paying utility bills and accepting direct deposits from employers. By powering your AR with the ability to accept ACH payments, you’re giving your customers an option they might prefer over other payment methods. After all, you want to keep it easy for them to pay your business.

4. ACH payments are secure.

ACH payments date back to 1974 when several financial organizations banded together to create regulations, standards, and security for these types of money transfers. Today, the federally regulated network is overseen by NACHA—The Electronic Payments Association. The not-for-profit organization enforces a strict set of controls and procedures for all parties using ACH payments.

In this study, checks accounted for attempted or actual fraud in 55% of businesses polled. For ACH debits, that number dropped by more than half. ACH payments are even more secure when combined with a payment solution that enforces the separation of duties and limits access only to authorized personnel. This effort significantly reduces the risk of internal theft.

Intrigued? It’s time to give ACH transfers a try.

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