Whether you run a small boutique shop or a major corporation, how you process payments affects profitability. Offering a wide range of payment options lets you cast a wide net, ensuring that your customer base is as large as possible.
ACH (Automated Clearing House) payments aren’t new – they’ve been used for over 40 years – but they’ve gained traction among today’s merchants – and for good reason. In addition to giving current and potential customers another way to pay for goods or services rendered, ACH payments can save your business time and money, increasing your bottom line.
Let’s take a look at what ACH processing is and how it can benefit your organization.
What Is ACH Processing?
Before we cover the advantages, it’s important that you understand what ACH processing is and how it works. If your company pays your employees via direct deposit, you’re already utilizing ACH payments.
Automated Clearing House is an electronic network that facilitates money transfers between banks using a unique routing number (located on the bottom of paper checks). Once the transaction is initiated, the money is debited from the purchaser’s bank account, and then it’s credited to the seller’s account. It’s like a paper check, only much better.
Let’s look at some of the reasons why today’s savvy businesses are embracing ACH payments as a primary processing option.
ACH Is Fast (and Getting Faster)
As of August 2017, ACH is in the midst of some exciting changes. On average, payments currently take 2-3 days to clear from one bank to the other. However, there’s a three-phase rollout happening that will lead to same-day ACH processing for businesses very soon.
By September 15, 2017, same-day ACH payments will be available for debit entries. On March 16, 2018, financial institutions will be required to make all ACH transactions available the same day by 5 pm (according to the bank’s local time).
Same-day processing is very exciting for businesses. Of course, receiving the payment the same day it’s initiated is always ideal. Besides giving you access to the money, it helps to keep bookkeeping efficient and consistent.
Another exciting aspect of same-day processing is its ability to make direct deposits immediately available immediately for employees. That means that people are more likely to spend money around payday, which can mean an uptick in sales.
Aside from cash, ACH processing is typically the most cost-effective for businesses. It’s cheaper than credit cards because ACH bypasses the middleman. Instead of paying a portion of the fee to a major credit card company, those savings get passed on to you.
Here’s approximately what you’ll pay in fees for standard payment options based on a $250 purchase:
- ACH: $0.28
- Paper check: $0.61
- Credit card: $4.80
Your fees may vary depending on your payment processing provider, but that should give you a rough idea of what to expect. As you can imagine, those numbers really add up over time.
One of the major benefits of using ACH processing is that you can set it and then forget it. This is especially useful for companies that offer subscription services. Here’s how it works:
- You set up a payment processing program
- Your customer authorizes a recurring billing schedule
- The payment is automatically deducted from the customer’s account on the authorized date (or an invoice is sent)
That’s it! You sit back and relax as the money is deposited directly into your bank account.
ACH processing is convenient for consumers and merchants alike. In today’s increasingly digital world, nobody wants to have to carry around or deposit paper checks. ACH lets you continue to enjoy the conveniences that a check provides, without the hassle. Instead of making trips to the bank to deposit checks, you can sit back and let the network take care of it.
As an added bonus, reducing paper checks is a great way to improve your company’s environmental impact.
One of the biggest issues with credit cards is the inability on behalf of customers to dispute or even chargeback payments. ACH payments are much more straightforward. There are only three reasons why a charge can be disputed:
- The amount authorized was incorrect
- The date it was processed was not authorized
- The charge was never authorized
As you can imagine, avoiding those three reasons is easy. As long as you’re careful to do things right, you should never have to worry about losing money on a transaction.
ACH Payments Are Secure
ACH payments use the same information as paper checks, but they’re much safer. Unlike paper checks that are exchanged through multiple hands, electronic transfers are never seen by other people. They can’t be stolen, and all information is fully encrypted to keep personal information away from prying eyes.
Reach a Wider Audience
In order to succeed in today’s saturated markets, it’s critical that you make your products and/or services readily accessible to potential buyers. Not everyone is going to want to pay with cash or credit, and paper checks are becoming increasingly rare. ACH processing fills an important niche, in that it allows customers to pay with their checking accounts digitally.
Preferential Treatment Over Paper Checks
Most banking institutions process electronic payments before paper ones. Let’s say someone makes an ACH payment to you for $200 and writes a paper check for someone else for $200, but they only have $300 in the account. Barring unusual circumstances, you will get paid and the paper check will bounce.
Use Modern Technology
Today’s consumers expect businesses to offer the latest and greatest technologies. If they walk into your store and you’re still relying on a cash register from the 90’s, you’re not going to make a strong impression. Providing a variety of options shows that your company is legitimate. It instills confidence in the customer, and shows that you go above and beyond to meet their needs.
Gain the Competitive Edge Today
It’s clear that ACH processing is here to stay, and it’s only going to keep getting better and better. Whether you’re fed up with high credit card fees, starting a subscription service, or looking to expand your customer base, implementing Automated Clearing House processing is a sound strategy for today’s businesses of all sizes.
Get Started Today
Before you rush into a decision, do your homework. Read about ACH options online. Talk to other business owners using it. Call Ach processing companies and compare your options. As long as you do it right, ACH processing can be a huge leap forward for your company. Take the time to find the best payment solutions, and you’ll be on the fast track to success in no time.
Arthur Jones is a small business consultant and angel investor from Fort Lauderdale, FL. He’s passionate about helping today’s up-and-coming companies to succeed. He’s currently working with Allied Wallet, an ecommerce merchant processing company that does ACH processing for business. In addition to his entrepreneurial endeavors, he enjoys sports, cooking, and reading.
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