ACH, or “Automated Clearing House,” is the name of the network that moves money and information from one bank account to another. Bill pay and direct deposit are examples of an ACH transaction. It’s a valuable resource saving time, conserving resources, minimizing errors, and expediting payment.
What is an ACH payment?
ACH is an electronic network that processes payments in batches. This model makes transferring funds between banks fast and easy. It’s inexpensive and faster than dealing with paper checks.Small business owners use ACH payments for:
- Convenience
- Paper reduction
- Easier tracking in account systems
- Automated bookkeeping
With ACH transfers, you can:
- Work with companies and vendors of all sizes more easily
- Pay vendors with a few clicks
- Establish connections to companies via your accounting software
ACH payment processing enables efficient cash flow management by giving parties a consistent, predictable, and transparent way to send and receive money. Personal bank transfers and wire transfers are different, for example. Here’s a quick run down:
- Internal personal bank transfer: These are transfers between two accounts belonging to the same person and at the same bank. For example, if you move funds from your checking account to your savings account, and the two accounts are at the same bank, that’s an internal personal bank transfer.
- External personal bank transfer: These transactions are between two accounts that belong to the same person, but at different banks. If you move money from a checking account at one bank to a checking account at another bank, the bank transfer is most likely an external personal bank transfer.
- Wire transfer: A wire transfer is used to send money from one person’s bank account to another person’s bank account. There is no intermediary (e.g. the ACH) in a wire transfer, so wire transfers are one of the quickest but costliest bank transfer methods. But unlike an ACH transfer, the payor, or customer, initiates the wire transfer for deposit into the merchant’s account.
Why accept ACH payments?
ACH payments are accurate
You can use ACH payment processing to handle automatic payments. This can prevent delays and boost your cash flow. ACH integrates with most accounting software, eliminates human error, billable hours, paper invoices, paper checks, and collection calls.
Customers like ACH payments
Many billing errors are just plain old mistakes. Automation prevents that. ACH transfers are secure, regulated, and trackable. Your customers can skip going to the bank or mailing checks. Plus, they can set up auto-pay to make things even easier.
Payment processing is faster with ACH
ACH payments should be in your account within 1-5 days, accounting for weekends and bank holidays. You don’t need to worry about updating your accounting software, taking your check to the bank, and waiting for the deposit to clear. The ACH provides a government-instituted, regulated structure ensuring security and standardization. Plus, ACH transfers are often less expensive than wires, checks, and credit card payments.
This article was produced by the Quickbooks Resource Center and syndicated by MediaFeed.org.
Featured Image Credit: DepositPhotos.com.
