Every business needs a quick way to send and receive money. Paper checks have been replaced by instant digital payments otherwise known as ACH transfers. Not only does this type of payment accelerate business, but it has also forever changed the way we financially network. In this guide,we willlook at the information you needto receive an ACH payment andprovidesteps for how to process ACH payments. An ACH payment is an electronic payment methodthat issent from one bank to another via the ACH (Automated Clearing House) network. This transaction is called anEFT (Electronic Funds Transfer). With sufficient funds, your customers canmakea direct deposit from their bank account to yours with the help of an ACH payment. They usually use aneCheck, which is a type of transaction that uses the ACH network. An ACH transfer isan effortless processof electronic payment thatfacilitatestransactions andeliminatesthe need for a paper trail. The ACH network is governed in the United States byNACHA (National Automated Clearing House Association)and this group, and other government entities require strict adherence to transaction protocols. There will be an electronic payment decline if the necessary instructions are not supplied. What information do you need to receive an ACH payment into your account? To receive ACH consumer payments into your account,you willneed toprovidethe following details: To get started, set up an ACH merchant account. You can use the ACH network to directly draw out customers' bank accounts for payments via a merchant account. You will need to provide information such as your tax ID, the length of time in business, and your processing volume to open a merchant account. Be aware that it will take days to get your account approved. To run ACH billing,you willneed approval. You will need to obtain the customer's permission before processing either a paper check (which requires them to sign) or an ACH withdrawal. They canaccomplishthis in several ways, like with a contract, a payment form, or a recorded phone call.What is an ACH payment?
How Can I Accept ACH Payments?
Always, request authorization from your customers.
Set up the payment details.
Customers can enter their checking account information (along with its routing number and payment amount) and make payments with an online form. You can receive that information either by recording a phone call with them or by speaking to them directly.
Submit the payment information.
When you initiate an ACH transaction and automatic bill payment with your payment processing software, you will be prompted to name the transaction before it is sent to the clearinghouse.
Setting Up ACH Payments
- Virtual Terminal:For keyed-entry payments, like MOTO (Mail Order Telephone Order) payments, you can type in the account information at your computer to process the ACH automatic payment plan. You can also use this to set up recurring auto payments.
- Website Payments:Your account provider can set you up with a payment gateway with a web form for collecting ACH payments within your website. It may take some encouragement to get your customers to look up their account and routing numbers toentera form at checkout, especially whenthey areaccustomed toentering payment informationin just a few clicks. But processing a $100 payment with ACH can cost just a few cents, soit isworth trying to nudge your customers towards ACH.
- Automatic Invoicing:Even if your customer elects not to set up recurring payments that automatically allow you to withdraw from theirdesignatedACH payment account, you can send them automatic invoices that give them theoptionto pay by ACH electronic transfers. Ask your automatic invoicing provider if theyprovideACH money transfer services, and if so, set up theinvoiceper their instructions.
Pros of Accepting ACH Payments
Typically Cost Less Than DebitorCredit Card Processing
ACH bypasses the credit card networks and therefore bypasses wholesale interchange and assessment fees. This makes ACH far less expensive than credit card payments. While both debit card payments and ACH payments draw money from a checking account, debit card transactions can be processed through a special debit card network or the regular credit card network, which means they are prone to the same types of fees as credit cards.
Free To Customers
While this is up to the individual bank, banks typically offer a free bill payment service to customers. Usually, this service uses ACH transfers, so it shouldn’t be too hard for you to encourage your customers to pay you directly from their bank account.
Funding Times Are ComparabletoCredit Cards
ACH transactions are batched three times per day. This meansit ispossible to receive the ACH payment on the same day it was sent (though banks still have control over the ultimate payout schedule, and there are often extra costs involved in expedited payments). Since ACH processing is the primary money transfer mechanism used by US banks, any credit card processing fund transfers take the same amount of time as an ACH transfer.
Ideal For Recurring Payments
Your customers can set up an ACH debit payment one time and never think about it again, and you can receive payments on time without having to send repeated reminder invoices.
Know StatusofTransaction Faster
Because ACH is all electronic, you’ll know very quickly whether the payment was declined/bounced, so you can contact your customer or even stop shipment or pause work on the project so you can prevent a business loss.
Electronic Record Can BeAuto Synced
In the busy world of a small business owner short on time, any automation helps.
Shorter PeriodforChargeback Initiation
Customers typically have only 90 days to dispute an ACH payment whereas they can have up to 120 days to dispute a credit card payment.
Rules For Reversals (Chargebacks) Are Stricter
There are only three reasons your customer can initiate a reversal for an ACH payment:
- The transaction was neverauthorized,or the authorization was revoked.
- The transaction was processed on a date earlier than authorized.
- The transaction is for an amount different than what was authorized.
Increased ReachtoConsumersWho Are Unable toUse Credit Cards
Not everyone can be approved for a credit card, and some people evenelectnot to have one. For them, debit cards are the preferred payment choice. Making ACH payments available to these consumers gives them anadditionalway to pay without using credit cards and might increase your sales.
Suitable For B2B Transactions
When businesses pay businesses to purchase inventory items, for example, the payment for these types of transactions often can getpretty large. ACH payment can handle these larger numbers. In fact, as of March 20, 2020, the same-day processing of the ACH dollar limit has been increased to $100,000 per day. These should be more than enough to pay for most inventory items any business might need.
Cons of Accepting ACH Payments
You May Wait Several DaystoReceive Your Funds
Credit card payment processing times fund transfers and ACH direct payments take the same amount of time. However, with credit cards, some processors will front you the money so that you can indeed get “paid” the next day while, with the ACH payment network, you must wait until your bankactually releasesthe funds, which might take several days. If funding time is of concern, talk to your bank and your ACH service provider to find out what’s possible for your situation.
ACH Transfers Are Only ProcessedfromMondaytoFriday
If you try to start an ACH transfer on a weekend day, your bankwill notsubmitthe request until Monday. Payment processors, for the verification process, usually deal with requests that are always processed during business days.
What Do I Need to Know About Security?
Securing Protected Information
This includes sensitive information like financial accounts, social security numbers, driver’s license numbers, and other personal information customers provide.
Securing Transmission
ACHuses the most current security protocols and 256-bit encryption for storing and transmitting bankaccountsand credit card information.
Validating Routing Numbers
To prevent fraudulent transactions and errors, NACHA requires us to take “commercially reasonable” steps to check that routing numbers are accurate.
Verifying Identity
NACHA requires merchants to verify customers’ identities before processing a transaction. This is important because phone or online ACH transactions only require a name, address, routing number, and account number—and these are readily available on any paper check.
Having A Written Security Policy
NACHA rules require you to have a written security policy that protects the confidentiality and integrity of sensitive information, guards against potential security threats and hazards, and protects against unauthorized use of that information. This sample security policy should serve as a good starting point.
Using EncryptionAndSecuring Paper Documents
Encrypt any electronic storage that contains bank account numbers and routing numbers. If you maintain paper documents with sensitive customer data, keep them in a secure place like a locked file drawer when they’re not in use.
Allowing Employee AccessToCustomer Records Only When Needed
Your employees should have access to protected customer information only if it’s required for a legitimate business need.
Detecting Fraud
NACHA requires merchants to flag any fraudulent transactions beforethey’resubmittedinto the ACH payment network for processing.
BNG Payments is payment processing made easy. Whatever your processing needs, we make it easy for merchants to accept credit and debit cards, mobile payments, e-commerce, and more. Contact us to find out more about what BNG Payments can do for your business.
