Thursday, 5 October 2017

Time is a precious commodity when you run a business, and finding ways to save more of it is essential.

Enabling your business to accept and initiate payments via the Automated Clearing House (ACH) network can be an effective way to streamline operations and make your cash flow more predictable. 

Use of the ACH network has become more common with consumers making an estimated 23.5 billion ACH payments to businesses in 2015, and most businesses use it as well. In 2016, 83 percent of business owners used the ACH network to process payments to vendors and suppliers. The convenience that collecting electronic payments affords can be invaluable to the success of your business whether for payroll, vendor payments, or receivables. If you're unfamiliar with ACH payments or the ACH network, it's worth knowing how they work. 

What is ACH? 

The ACH network is an electronic network through which financial transactions are processed either same day or on a future date. According to NACHA, an electronic payments trade association, the ACH network supports more than 20 percent of all electronic payments in the United States. 

The ACH network processes two distinct types of transactions: ACH payments and ACH deposits. Businesses and consumers alike can use the ACH network to send payments to individuals or other businesses and receive funds electronically. That can also include payments to and from government agencies.

The benefits of using the ACH network

From your customer's perspective, ACH network payments offer many advantages including: 

  • No need to write checks. Using a payment app or your online banking system, customers can initiate payments from their mobile device at the push of a button. Scheduling automatic ACH payments makes the process even easier. 
  • Payments can be processed and confirmed quickly via online banking or a direct file feed. 
  • Customers can date payments for the same day or schedule for a future date. 
  • Less paper means more environmentally friendly. Consumers can have their paychecks deposited directly into their bank account or receive money through digital wallet apps. 

For business owners, the primary benefit of accepting ACH payments is speed. When a customer writes a check, you may have to wait days for it to arrive in the mail. Then, the check must be processed and deposited. And then you have to wait for the check to clear. ACH payments can significantly reduce the amount of time devoted to payment processing. Also, ACH transactions can carry remittance information for multiple accounts or invoices tied to each payment. 

The NACHA Operating Rules generally allow for ACH credit transactions to settle in one to two business days and debits to settle on the next business day. New ACH rules allow for originated credit transactions to be processed the same day if needed. The shorter ACH processing time means your business or your payees have faster access to cash and improved efficiency in tracking incoming payments. 

Accepting ACH payments can be more cost-effective than accepting checks or cards. ACH payments typically cost less than 75 cents per transaction. Checks may incur lower bank fees, but there is a cost to buy check stock, write the check, mail it, reconcile it, and more. There are other benefits to accepting credit and debit cards, but you pay a percentage of the transaction amount. For example, credit card payments may cost you 2.5 percent for each $100 processed. That's a significant amount of savings for your business. 

Customers who don't have a debit or credit card or would prefer not to use them to make payments may appreciate having ACH as an alternative. The ability to integrate ACH transactions into your bookkeeping or accounting program presents the opportunity to automate the posting of your receivables. Finally, the ability to schedule automatic payments to vendors and suppliers leaves you with more time to focus on other aspects of your business. 

Accepting ACH payments

To accept ACH payments, you'll need to partner with an ACH payment processor. BBVA Compass, for example, offers commercial banking solutions for businesses seeking to establish ACH payment and deposit services

Once you've implemented ACH services, accepting payments is just a matter of letting your customers and vendors know that ACH is now a payment option. With relatively minimal effort, you can be well on your way to saving your business both time and money. 

The content provided is for informational purposes only. Neither BBVA Compass, nor any of its affiliates, is providing legal, tax, or investment advice. You should consult your legal, tax, or financial advisor about your personal situation. Opinions expressed are those of the author(s) and do not necessarily represent the opinions of BBVA Compass or any of its affiliates. All accounts and credit are subject to approval, including credit approval. BBVA Compass is a trade name of Compass Bank, a member of the BBVA Group. Compass Bank is a Member FDIC.