How Can ACH Processing Benefit Your Business?

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Automated Clearing House (ACH) payment processing continues gaining popularity as businesses and customers recognize this system’s many benefits. ACH processing is an electronic payment method that allows companies and individuals to send and receive money.

These digital transactions offer significantly lower costs and added convenience for recurring transactions. As a result of ACH’s benefits, many businesses are leaving paper checks and other payment methods behind in favor of this electronic option.

 

Overview of ACH Payments

ACH payments are a digital method for sending and receiving funds. These transactions pass through the Automated Clearing House, an electronic funds transfer (EFT) system established by the Bureau of the Fiscal Service, letting businesses and individuals send credit and debit card payments.

Businesses often use these payments to cover employee payroll or receive money for customer payments for goods and services. In many cases, electronic payments must obtain an authorization request from a credit card network or issuing bank. ACH payments instead go through the Federal Reserve or a clearinghouse to secure payments.

Once the request passes through one of these organizations, the receiving depository financial institution (RDFI) posts the payment to the requestor’s account. Businesses save money and time making money transfers when using ACH instead of credit card authorization. They can accept or send payments up to $1 million daily, and the system recognizes revenue faster, so you can receive or send funds in as little as a few hours.

 

Are ACH Payments Safe?

As a government-established electronic payment method, ACH has federal regulations for safety in money transfers. Nacha, a non-profit organization, also regulates and runs this money transfer network. These controls make fraud rare, though not completely unlikely.

Here are a few additional ways your business can reduce the risk of fraud:

  • Choose a trusted payment provider: Ensure your provider complies with Nacha rules. You can look for Nacha-preferred partners for the most security.
  • Use microdeposits: The best payment providers offer microdeposits to verify recipient identity. These are two small deposits made to an account before formal transactions begin.
  • Seek information protection: Your provider should utilize tokenization and encryption to disguise sensitive data. These controls ensure only the intended recipient can interpret the data you send.

 

Benefits of ACH Payments for Businesses

Many businesses adopt ACH payments for ease, security and speed. This electronic money transfer method continues to grow in popularity, with companies carrying out 5.94 billion transactions using this method in 2022. Businesses compare these transactions to previous payment methods like paper checks and see distinct ACH payment benefits, leading them to adopt the system.

Lower Costs

Compared to electronic and paper payment methods, ACH transactions are one of the most cost-effective money transfer options. Credit card companies require network fees for processing transactions. These fees range from 1.5% to 3.5%. Checks also cost $2.01 for internal expenses like financial institution fees and $4 for external costs like personnel. Paper checks are often mailed, which is an additional expense when you factor in materials and postage. In comparison, ACH has a median internal spending of $0.15 and an external cost of $0.25.

Speed

ACH payments have faster processing times. Like all electronic processing methods, ACH is faster than payments like checks, which must be mailed and manually entered. Checks might also get lost, extending the time before the recipient receives money in their account.

ACH transactions also process faster than many electronic transfer methods, sometimes within a few hours on the same business day. You can also schedule transactions for one or two business days away. With same-day transfers, you can ensure that payments settle the day your business sends them out.

Minimal Human Error

Human error can cause payment delays and impact organizations’ cash flow. With computer-automated payment through ACH processing, you reduce mistakes like incorrect payment amounts or errors in recipients’ account numbers. You can set recurring payments up once, ensure the information is correct and let the transaction repeat each billing cycle without needing adjustment.

Customer Convenience

ACH payments also have many benefits for customers, including the convenience of a one-time setup. For recurring expenses like rent or a subscription service, your business can request authorization once, then continue to take payments as needed. Customers like this method because it is convenient and they will always pay on time, avoiding late fees or lapses in service. Business-to-business transactions also work well with ACH because many companies are switching to digital money management tools.

Expense Tracking

With ACH, your business can record all income electronically, and the information is more easily accessible to bookkeepers. With ACH payments you can easily view transactions online and connect them to money received or disbursed.

 

Collect ACH Payments With CSG Forte

With CSG Forte’s complete payments solution with ACH processing, we make it easy for your business to send and receive digital payments. Learn how you can start accepting ACH payments and Get Started with CSG Forte today.