Throughout this article we’ll answer the question: what is an ACH payment and address when you might use one. We’ll also talk about how ACH payments work, how to make ACH Deposits, and their advantages/disadvantages.
What is an ACH Payment?
ACH payments are electronic payments between banks across the ACH network. ACH stands for Automated Clearing House, an electronic network that coordinates payments and automated money transfers.
For businesses, ACH payments are an easy way to send and receive money without having to use wire transfers, checks, cash, or credit cards. If you set up direct payments on your account it can ease the tension of chasing down invoices.
When are ACH payments Used?
While you might not be familiar with the term, there is a good chance you’re already using some form of ACH Payment in your day-to-day life. ACH Payments include things like direct deposits from your job, paying your bills online, and transferring cash from your brick and mortar bank to your online bank.
What is the Difference Between an ACH Payment and a Wire Transfer?
There are several differences between ACH Payments and Wire Transfers, what’s important to most people is the time it takes to process everything. Wire transfers transfer money in real time, meaning once the money is sent from one account to another it can be accessed right away. ACH Payments are processed in batches. There can be some lag time between when the money is sent and when people can access it. It can take a few days.
Pros and Cons of Using ACH Payments for my Business
There are few pros and cons of ACH payments we should address as these payments have their advantages and disadvantages. Whether they’re the best payment type for a particular transaction really depends on the circumstances. Let’s take a look at the positives first.
Pros of ACH Payments
- Convenience: With ACH Payments you don’t need to write a cheque, take a trip to the bank, or send an invoice by mail. Similarly, your customers can set up automatic payments to your business, making sure they’re not paying bills late or forgetting them entirely.
- Lower Processing Cost: ACH Payments have lower processing fees than credit cards, wire transfers, or any other type of payment. If you’re processing dozens — even hundreds — of payments a month those savings add up.
- Less errors in the payment process: When people are writing checks or doing paperwork by hand they’re prone to making mistakes. Those mistakes are less likely to happen when everything is online and automated
While ACH Payments have a lot of upside, there are unfortunately some drawbacks to using them instead of other types of money transfers. Here are some of the cons to using ACH Payments.
Cons of ACH Payments
- Speed: Like we mentioned above, ACH Payments can take three to five business days to process. If you need access to those funds right away, you’re going to want those payments to come in a different form
- Processing Limits: There are caps to how much money you can move on a daily and monthly basis with ACH Payments. The same day ACH transfer limit is capped at 100k.
- Cut Off Times: ACH Payments are only available at certain times of the day.
- Limited to America: Most financial institutions don’t allow ACH payments from International bank accounts
How to Send and Accept ACH Payments
While ACH payments aren’t ideal for every business transaction, they’re ideal for things like recurring payments and are a lower-cost option than other forms of payments, which often come with high fees. If you’re looking to set up ACH Payments for your small business, we’ve got you covered below.
- Choose your ACH provider: You can set up your business to send and receive ACH Payments through your NorthOne business bank account. If you haven’t got an account already, you can open one here. It only takes a couple of minutes.
- Request Authorization For ACH billing: You can request ACH billing from your customers. In order to start ACH billing you’ll need to collect info like the customer’s legal name, their bank’s name, whether they’re using a checking or savings account, the account number, and their bank’s routing number. After you’ve done this you’ll be able to authorize the payment. For recurring payments, you’ll only need to do this once.
- Get the ACH Payment set up and submitted: Your customers will have to provide the necessary information to authorize the payment and authorize the ACH transaction. From there you can process the ACH transaction and accept the payment. Most commonly this is done through setting up a payment gateway on a website or through automatic invoicing, like what happens when you pay your bills electronically.
Conclusion: ACH Payments
This article should have covered the basics you need to know for getting started with ACH Payments. If you have any more questions — or need anything specific to your small business bank account addressed — the customer service reps at NorthOne are available through live chat, phone, and email. Feel free to get in touch.
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