How Small Businesses Can Use ACH Transfers
- Finance 101

How Small Businesses Can Use ACH Transfers

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ACH (Automated Clearing House) transfers make it easy for small businesses to process payments faster and securely. ACH transfer is a computer-based system that processes transactions primarily between financial institutions. However, ACH can also be used by small business owners looking to cope with advancing technologies and digitization.

Unlike other payment technologies, using ACH transfers is very easy. For starters, registering and learning how to make an ACH payment is straightforward, and they can help in the following daily operations of your small business.

Paying employees

Small businesses can effectively pay their employees through ACH transfers. First, you need to send payment instructions to your bank to complete the direct deposit request for your employees. However, to complete these transactions, you will need your employees’ account number, bank routing number, and the type of account (either checking or savings).

Paying suppliers

ACH provides an easy option of paying suppliers who accept electronic payments. Apart from ensuring quick and convenient transactions, ACH transfers significantly reduce or mitigate the risk of fraud. For example, a Federal Reserve Study that compared various modes of payment used by businesses found that ACH transfers have the lowest fraud rates of only $0.08 in $10,000 payments. This makes ACH a better payment option for small and established businesses when making large payments to suppliers.

Accepting payments from customers

Accepting electronic payments broadens your target market and customer base regardless of your business niche. Your customers should authorize funds to transfer through a vendor to accept payments. You should sign up with payment processing companies, such as Plaid, Stripe, or PaySimple. You can simplify customer payments by creating invoices as well.

Paying the government

Paying taxes is an important yet complicated aspect of running a small business. Fortunately, you can also use ACH transfers to pay your taxes to the IRS. In addition, individuals and businesses can use different electronic fund withdrawals outlined by the different tax forms. Completed transactions will feature in your bank statement, which can be used as proof of payment.

Funds transfer

ACH also provides a convenient way of moving money between two banks. While there are no fees charged when receiving ACH payments, you will incur a small fee when transferring money to different banks. The best thing about using ACH to move funds is the associated ACH risk management tools, such as debit blocks, which make transactions quite safe.

Is ACH for Small Businesses Worth It?

Apart from the convenience and safety of using ACH transfers, some quick math is enough to convince you that ACH payment processing benefits your business. First, compare the costs of using your payment provider versus how much you spend on credit card processing.

For instance, if you run a marketing agency with ten clients who pay $2000 monthly, most credit card processors charge 2.9% for every transaction. With this, you will be spending $583 monthly to process credit cards. On the other hand, ACH payment vendors charge a fixed amount for all payments made.

Endnote

Small business owners can use ACH payments in various ways. While fees are incurred with ACH transactions, short processing times, fraud reduction, and ease of use make it a good payment option compared to paper checks.

How Small Businesses Can Use ACH Transfers

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