Pages

ACH Transfers in the Business World

What Are ACH Transfers?

This is the usage of the Automatic Clearing House network to facilitate the e-transfer of money between different banks. These money transfers can be bill payments, peer-to-peer transactions, direct deposits by government bodies or employers, bill payments, business-to-business payments and so on.



Businesses have found ACH transfers to be a versatile tool that can be used for a wide range payment purposes, such as:

Acceptance of Payments

Many businesses approve their customers sending ACH payments for products or services due to their convenience and the possible rewards the customers could gain. There are mobile applications that allow customers to pay for items before or when they get into a store, and earn rewards from the savings the merchant will make from the lower ACH fees. Most times, when a customer decides to pay with ACH, they save the business some credit card fees.

Sending Money to Suppliers

Suppliers that deliver products to businesses on a large scale now prefer to collect their payments through ACH instead of cheques, as it is a lot faster to process.

Receiving Recurring Bills

There is a tool for businesses called ACH direct debit that allows them to collect recurring payments such as subscription fees, monthly bills, and insurance bills from their customers. Once their customers authorize these recurring billing, they will be able to make an ACH payment every month or year for the services they subscribe to without breaking a sweat.

Transferring Internal Funds

Businesses that have more than one bank account would be able to transfer money across these accounts cost-effectively, conveniently and faster than when using cheques or wire transfers.

Paying their Taxes

In the United States, businesses can pay their taxes with an ACH debit tool called Electronic Funds Withdrawal (where the IRS automatically takes tax money from a business account) provided they file it through a tax preparer that uses that tool. This tax payment method is cheaper and faster than mailing a cheque to the IRS.

Business managers that do not know how to do an ACH transfer when they want to pay their taxes need not worry, as most tax software has built-in features that allow their users set up ACH payments with the IRS. All they need to do is to follow the on-screen instructions the software provides.

Disbursing Employee Salaries

Employers use ACH direct deposit to pay employee salaries directly between banks, as it is more convenient than issuing cheques and it allows payment to be made in batches. The direct deposit feature can be set up in some accounting software applications and will need employees to share the bank account and routing information before they can be used.

Guide to Using Ach Transfers

Learn how businesses can transfer funds with this short ACH payment guide:

Put together the necessary information

To make an ACH transfer from a funded bank or credit account to another, the business accountant needs to provide the bank account name, routing number, account number, type of account, and transaction amount.

Select either ACH Debit and ACH Credit

ACH debit, which allows the sender to establish a transaction with the recipient by submitting their ACH details to them, is a slightly risky option. On the other hand, ACH credit requires one to give a financial institution the authority to send a payment to a recipient. The financial institution will withhold the sender’s account information from the recipient and is more suited to business transactions.

The sender would have to choose one of these two options, but since it is a business being considered in this context, ACH credit is the right option.

Carry out the transfer

To initiate this, there will be some paperwork to be filled and filed with the financial institution that will carry out the transaction. The information provided will be used to link the two accounts involved in the ACH transfer together.

Afterwards, the business should specify whether the transaction with the originating account will be debit or credit, before entering a payment amount and payment date.

Set up the system necessary to receive ACH transfers

This applies to businesses that have customers that want to send ACH payments to them. The business in question would have to create an account on a payment platform like Stripe or Plaid. Such platforms will provide all the ACH information and tools that businesses can use to receive funds.

Frequently Asked Questions

Are ACH transfers always instant?

No, they are not because the transactions need to be verified. However, they are much faster and convenient than wire transfers or the process of cashing a cheque.

What do businesses gain when they pay with ACH?

In addition to the speed with which the transactions occur, businesses also benefit from the lower transaction and processing fees, as well as the ease to track payments.

Endnote

The convenience ACH transfers provide to businesses makes it a very useful tool for financial transactions. Fortunately, it is easy for modern businesses to set it up and this guide shows employers and customers how to pay with an ACH transfer.

No comments: