ACH network has become a popular way of making bill payments. If you have a small business, you too can get many benefits by using the ACH payment system. What to know how? Keep on reading this article.
Before we start discussing how an ACH payment system can help your business, let us first discuss what does ACH payment mean. ACH or automated clearing house payments uses a computer-based network to process transactions. Even though financial institutions mostly use the system, small business owners too can take benefits from it. It is an eminent part of today’s financial transactions and one of the best examples of how technology has helped us.
How does ACH payment work?
ACH payments are made by transferring funds directly from one bank to the other. From the point of view of a small business owner, they can send one-time or regular payments through this system. Using the ACH network will no longer have to depend on physical debit and credit cards. The process takes place through an automatic clearing house and is widely used by large businesses to pay their employees or transfer money between two institutions. It can indeed be a useful payment solution, even for small businesses looking to secure their payments using modern methods rather than the traditional cheque or card payment.
Why ACH transfer?
Switching to ACH transfers for sending and receiving money comes with several benefits:
- It increases the overall speed and ease of transaction. It is an electronic mode of payment, which is fast and easy to handle. It is also much safer compared to the traditional methods of payments, like a check.
- The whole process does not involve any cost; however, your bank might charge a nominal fee for transferring the money.
- With payments made easy, your sales conversion would also improve. It would help you to have a better relationship with your customer.
- You would not have to visit anywhere to make or receive the payment physically. Everything is done over the network, remotely.
ACH payment system for small business
Following are how small business houses can use the ACH payment system:
- For salaries- Small businesses can use ACH to pay their employees. To do so, you would have to send payment instructions to the bank. An employee receiving payroll checks and government benefits through direct deposit transactions can be a good example of this. The process is usually done through payroll software. Employers need a bank routing number, account information, and authorization of the employees to send payments using this process. With payroll, employees will be able to enter their information themselves.
- For government payments- As a small business, you can also pay taxes to the IRS through the ACH system. There are various options available regarding fund withdrawals for individuals and businesses for a given tax form.
- For supplier payments– You can also pay your suppliers using this electronic payment method. It can decrease the chances of fraudulent transactions. Studies have also suggested that this method is quite helpful in reducing fraud rates. ACH offers safety and convenience to small business owners, and it is a hassle-free way of transacting compared to paper checks.
- For moving funds- You can also do fund transfers for your business, from one bank to another, using the ACH method. The transaction process will not cause you any money, but the banks may charge a nominal fee for moving the funds to another bank. Apart from this, many banks also offer various risk management tools for ACH. It can include educating the customers about frauds, risks, and credit blocks.
- For accepting payments- Small businesses can also receive payments from their customers through the ACH network. The customer would need to authorize the payment to be transferred to your business bank.
The ACH electronic system is a reliable network that is serving thousands of big financial institutions. It helps to facilitate secured and timely financial transactions all over the United States. It acts as a delivery mechanism that helps individuals and companies organize money from one bank account to the other. The ACH transactions might include direct deposits and direct payments. It can also include business-to-business (B2B) transactions, vendor transactions, client transactions, and government transactions.