As a small business owner, understanding Automated Clearing House (ACH) transactions is essential, as more and more banking tasks are performed electronically. There are many instances when a small business can use ACH transactions. For example, you might use ACH to move money between your own bank accounts that exist at different banks, initiate direct deposits for employees, pay a vendor or collect payment from a customer. One of the biggest advantages for a business to use ACH payments is to be able to process banking transactions in batches, instead of single items.

Like all major decisions you make for your business, it is important to have a thorough understanding of ACH before deciding if it will be right for your business. While there are a few challenges associated with using ACH, there are many key benefits to note.

CHALLENGES:

• Transactions can take 1 business day to process as compared to wire transfers, which are processed in real time.
• Recurring payments are not guaranteed since the bank accounts they are drawn from must have sufficient funds at the time of debit.
• More information is required since the originator of the transaction must have the bank routing number, account number and authorization of each business or person receiving a payment.
• Although very common, ACH payments are not as widely accepted as checks.

ADVANTAGES:

• ACH makes banking easier, more convenient, and more efficient.
• Better security and reliability.
• Fees are lower per transaction than other types of payments.
• The chance for fraud is reduced, since transactions are seen by fewer people than check transactions.
• In a major disaster such as Hurricane Harvey, ACH processes without delay. Checks may be more difficult to deliver and are more easily lost.
• Employees and companies receive payments faster.
• ACH saves time since payments like payroll and recurring monthly bills can be processed in batches.
• Allows for funding by checking or savings account.
• More flexibility to send and receive money, which increases customer satisfaction and retention.

How to get started with ACH

• Do your research and seek out banks such as Stellar Bank, with services that will help a small business who want to become an ACH receiver and/or an ACH originator.
• Make an appointment to speak to the ACH experts at your bank, such as small business, cash management or treasury management bankers.
• Gather information about your payments (payroll, examples and types of incoming and outgoing payments, dollar amount of the payments, etc.) to discuss when you meet with your banker.
• Set aside time to complete all the necessary forms for risk underwriting and security.
• Ask about and take advantage of risk management services offered by your bank, such as fraud prevention tools and risk education.
• Ask your banker to explain all associated costs for ACH and how many payments you will need to make to justify the cost.
• Ask about options for your bank to bundle costs into base fees and offer incentives; ask if ACH services can be bundled into base fees for online banking.
• Ask your bank if they provide assistance to help small businesses set up ACH origination and simplify ACH credit origination.

Ask about your options to make ACH available on all or selected new accounts.

ACH payments can be an efficient way for small businesses to facilitate direct payments, payroll, and other transactions electronically. For a thorough guide that explains all of the electronic payment options available to small businesses, download the Small Business Payments Toolkit. This free resource was developed by the Business Payments Coalition, a group of organizations and individuals volunteering to promote greater use of electronic business-to-business (B2B) payments.

Contact us to get started with ACH at Stellar Bank or to learn more about our small business banking services. Our team is made up of some of the brightest and most committed professionals in the industry. We are passionate about guiding you to the full-service banking solutions your business needs to meet its goals.