Getting paid for what you do—performing services and/or selling goods—is just as important as what you do. Simplifying and expediting the process of getting paid makes good business sense. Understanding how Automated Clearing House (ACH) payments work can really benefit your business.
What are ACH payments?
ACH is a network that allows funds to move electronically from bank to bank. Payments owed to you are pulled from customers’ checking accounts and are deposited directly into yours. According to Nacha, the organization that governs the ACH Network, there were 26.8 billion payments through the ACH network in 2020, totaling $61.9 trillion.
ACH can be used to receive payments—money owed to you—or to pay your bills. For example, nowadays more and more employees receive their paychecks through ACH payments. With that being said, ACH is used primarily for B2B transactions.
What are the benefits of accepting ACH payments?
Instead of waiting for a check or using plastic to get paid, ACH offers a number of benefits to consider:
- Improved cash flow: With ACH, payments are sent directly to your business bank account. There’s no need to wait for a check to clear. Technically, ACH payments could take 3-5 days for verification purposes, but typically, a transaction is settled in 1-3 days and some even settle in a day or overnight.
- Convenience: ACH payments free up your time, giving you more hours to devote to running your business. You don’t need to waste time—whether in person or via a mobile phone—to deposit a check, ACH payments are automated. If you have regular customers, you can schedule payments, so you set it and forget it.
- Cost savings: ACH payments are usually free, although some banks may charge a modest fee for transferring funds to different banks. Whichever the case, it’s less costly than accepting payments through credit cards, which have high transaction costs. Similarly, some business bank accounts may charge each month for check deposits.
- Security: ACH payments offer considerable protection against fraud. In comparison, checks sent to you by mail can be intercepted by thieves. Unlike credit card payments which can easily be reversed (“chargebacks”) when customers raise disputes, you have greater comfort in keeping your money with ACH payments. With ACH payments it’s hard for a customer to dispute a payment.
How to accept ACH payments
While the terminology of ACH may be unfamiliar, the process of accepting payments from customers is quick and easy. The first thing you need to do to accept ACH payments is set up a merchant account via your business checking account.
This requires you to obtain 3 things from your customer:
- The customer’s name (the name on the customer’s bank account)
- Bank account number
- The bank's routing number
Even though ACH payments are more secure than checks (JP Morgan reported that for 2019, 74% of all organizations experienced check fraud), some vendors may still be reluctant to provide you with their information. They might be unfamiliar with the ACH payment process or they may fear a data breach that will expose their banking information. It may take some educating on your part to convince these vendors of the security of ACH payments, but this is the direction that businesses are moving to.
If you want to pay your bills using ACH, Melio can allow you to do so easily. You don’t even need a special Melio account. All you need to do is follow these three easy steps:
- Provide your bill details either manually, by connecting your QuickBooks Online account, taking a photo of a bill, or uploading a file.
- Select bank transfer as your method of payment.
- Melio can take it from there, they will make the bank transfer and activate the ACH payment for you. Melio does not charge for ACH transfers or to pay your bills.
Join the digital age and use ACH for your payments.
*This blog post is intended for informational purposes only and is not intended as financial advice.
**Melio does not provide legal, tax or accounting advice, and you should consult with a professional advisor before making any financial decisions.