Automated Clearing House, shortly known as ACH, is a payment system followed in the US allowing people to make money transfers with ease. It is an ideal choice for businesses to process electronic transactions without a card network, wire transfer, paper checks, etc. ACH provides ways to transfer money from a bank account to another account immediately that will save time. Merchants can automate and streamline their accounting process with ACH that will help enhance their efficiency levels to a large extent.
What are the benefits of ACH payments?
ACH payments provide several advantages to a business which gives ways to overcome any unwanted issues. Moreover, they allow an organization to accomplish goals in the payment process.
Here are some benefits offered by ACH payments.
- Lowers processing costs
One of the main advantages of ACH is that it has low processing costs when compared to other payment systems. If a business utilizes a provider with a flat rate, then processing ACH costs less than processing credit cards.
- High retention
ACH offers high retention to a business because it gives ways to reduce the risks caused by expired debit cards and credit cards. It allows a business to deal with low declines when processing ACH payments.
- Convenience
ACH payments offer convenience not only for a business but also for customers. Businesses can avoid paper checks and paper invoices with them that will help reduce expenses. Apart from that, customers can avoid checking their checkbook every month after choosing ACH payments.
What are the types of ACH transfers?
ACH credits and ACH debits are the two types of transfers available for a business. Hence, it is wise to understand them in detail that will help a lot to process the payment with ease.
- ACH debits
ACH debit involves the withdrawal of the amount from the bank account of a customer after entering the details properly. A bank will check them quickly for the approval process. In the next step, a bank will debit the amounts from a lender’s bank after completing the verification.
- ACH credits
ACH credit involves transferring the amount from a customer’s account into another bank account. A business will receive the money through the credit process when customers want to make payments for a purchase.
How do ACH payments work?
ACH payment system involves four steps and businesses should understand them properly that will help process the money without any difficulties.
- Customer authorization
It is the first step in ACH payments and a consumer will authorize a direct payment from his/her bank account on a company’s website
- Payment initiation
A business will send the bank details of a customer to its bank or ACH provider with an instruction called the Originating Depository Financial Institution (ODFI)
- Payment requisition
The ODFI will make payment requisition to the customer’s bank by routing the details called the Receiving Depository Financial Institution (RDFI)
- Payment process
The RDFI will check the bank accounts of a customer to verify that it has sufficient funds or not and will process the amount immediately
How can a small business accept ACH payments?
Merchants who run a small business should learn how to accept ACH payments from different sources that will help get more ideas.
Here are some things to follow while incorporating into the operations of a business.
- Determining the feasibility
Since ACH works in the US only, a small business owner should evaluate the geographic considerations. It is wise to study the demographic areas first to know whether a small business store is eligible to apply for the ACH payment system or not. The store owner should also understand the purchasing pattern of customers before implementing the system. Apart from that, it is imperative to know the types of transactions offered by ACH payments in detail.
- Choosing an ACH provider
In the second step, a small business owner should check with the bank to see whether it offers ACH transaction support services. Furthermore, it is necessary to know the fees, ease of use, and other things from a bank that will help meet the essential needs.
- Setting up an ACH merchant account
Small business owners should consider setting up an ACH merchant account to process the payments with ease. They should submit the required documents to a merchant account service provider for getting approval quickly. In most cases, ACH providers offer a recurring billing system and a small business store should make sure that is free.
- Choosing ACH payment methods
A small business owner should choose the right type of ACH payment methods such as a check scanner, virtual terminal, and website. Moreover, they show ways to process payments as soon as possible.
- Avoiding unwanted costs
A small business store should check the guarantee of a service and chargeback protection which gives ways to save more money on unwanted costs.
