How to Set Up ACH Payments for Your Business
ACH offers a wealth of benefits for small business owners. This choice of payment method has become an increasingly popular payables automation solution for efficiently and cost effectively moving company funds, but also works equally well for receivables. It’s frequently used for consumer payments, allowing for regular billing payments which result in a more solid business foundation.
This article explains why you should include ACH as an additional payment method in your offerings. It also details an easy, step-by-step guide to setting up ACH in your business.
Step By Step: How To Set Up ACH Payments
Before we explain how to set up ACH payments for your business, let’s review how ACH works so you can more clearly understand the process.
What is an ACH Payment?
ACH stands for Automated Clearing House, a network of participating banks in the U.S. that provide bank-to-bank transfers of funds. It allows for one-time and/or ongoing automatic payments to and from your bank account, which makes payment simple and convenient for you and your customers.
How ACH Transactions Work
All ACH transactions involve a bank that initiates the request (known as the Originating Depository Financial Institution, or ODFI), and a bank that receives the request (the Receiving Depository Financial Institution, or RDFI).
Let’s say you request a monthly payment from a customer. Your bank acts as the ODFI by sending a transaction request to ACH or the Federal Reserve, which then processes the request in the form of a credit to your account. Your request is then forwarded to the RDFI, where the customer’s bank ensures the availability of funds and completes the process.
Benefits of taking ACH payments
There are numerous benefits to ACH payments. Let’s review the benefits in detail so you can use ACH to your greatest advantage.
Lower Transaction Fees
An ACH processing fee is less than most types of transactions, including credit card transactions, debit card transactions, wire transfers and even paper checks. In addition to lower per-transaction fees, you can choose a flat transaction fee per month for even more savings if you regularly run a large number of ongoing transactions.
Higher Transaction Size Limits for Fast Payment
The average transaction size that’s allowed via ACH for fast payment is higher than checks or credit cards. Typically, with ACH, you can take payments as large as $25,000 per day.
The Payment Benefit of ACH vs. Wire Transfers
Much like a wire transfer, an ACH payment is a form of electronic funds transfer (EFT). It differs from wire transfers in that ACH allows for sending and receiving funds, whereas wire transfers only send funds.
The ACH payment processing time for a customer transaction takes longer (3-5 days on average), but in exchange, ACH costs less and can be accomplished apart from bank employees.
Advantage of ACH over a Credit Card Payment or Debit Card Transaction
In addition to costing less than a credit card transaction fee, an ACH choice of payment method results in fewer disputes than credit cards. ACH charges can only be disputed if the charge was not authorized, if it’s not on the correct date, or if the amount is different than agreed upon.
A debit card has similarities to a credit card because they often use the same network. This puts ACH at a distinct advantage.
ACH vs. Cash
With ACH, you can safely manage cash flow while reducing the risk of loss or theft of cash. You may also opt for a merchant cash advance option with ACH.
Benefits Over Traditional Paper Checks
ACH fees are less than paper checks and avoid the risk of theft or loss. ACH is a more reliable billing payments method. Checks may still be processed through ACH via eCheck payment processing.
The Process of Incorporating ACH Payments into your Business
Now that you understand the benefits of ACH payment, you’re ready for set up. The current process to set up ACH payment is pretty simple. Follow this seven-step process:
Step 1: Determine if ACH is Right for You
ACH is only allowed between U.S. banks. If you don’t offer recurring billing or have a high frequency of transactions, you may not benefit from offering this additional payment method if you have other payment options.
Step 2: Choose an ACH Payment Processor
Your business bank may offer ACH capability so you can send an ACH through your bank. But you may want to compare the cost of services for one-time and automatic payments with third-party providers. There are many options; for example, BNG Payments is a third-party provider. For best results, select three or four providers before making your final selection.
Step 3: Read the ACH Terms and Conditions
Before making your final selection, be sure to read the ACH payment terms and conditions from each payment provider. If a deal seems too good to be true, there’s often a catch.
Step 4: Complete the Payment Processor’s Bank Paperwork
ACH syncs directly with customer and business bank accounts to move bank account funds. This requires your business bank account info, including routing number and account number. You’ll also need to provide an estimated volume of transactions and sign the documents.
Step 5: Select Your ACH Payment Types
When enrolling, there are four basic types of payment defined by the way customers give permissions. Select the methods of access that are best for you.
- PDD ACH: Written permission from the payer to automatically deduct funds.
- WEB ACH: Web-based permission to automatically deduct funds.
- TEL ACH: Phone-based permission to automatically deduct funds. Note, these calls must be recorded.
- ARC and BOC: A written check that provides permission.
Step 6: Sync Your Accounting Software with ACH
ACH connects directly with most accounting software, such as QuickBooks. This allows for fast and easy payment while generating invoices and automatically sending ongoing invoices and receipts to customers for each automatic payment. You won’t have to lift a finger.
Step 7: Enlist the Help of a Payment Expert—Your Merchant Service Provider
Your current provider for credit card transactions may not handle ACH. It’s smart to select one merchant service provider (MSP) that offers ACH and all other forms of consumer payments you typically receive.
BNG Payments is a one-stop-shop for any software and hardware you need, including virtual terminals for greater portability. Our in-depth experience with ACH set up makes directly connecting ACH with your existing accounting software a cinch. We even offer a simple yet comprehensive onboarding process that makes getting started with ACH as easy as possible.
BNG Payments is payment processing made easy. Whatever your processing needs, we make it easy to accept ACH payments, credit and debit cards, mobile payments, e-commerce and more.
Contact us to find out more about what BNG Payments can do for your business.