ACH – The Underground Money Railroad

tunnel, represents a underground money system, such as ACH payment processing

ACH Business Account direct deposit and direct withdraw transaction details thoroughly explained in 5 minutes. If you’re wondering what does ACH means, what are the benefits and disadvantages of an ACH account, are ACH accounts safe, and most importantly how do they help boost sales and productivity, you’re on the right page.

ACH Electronically Funds Transfer

This is Deborah Pretty (AKA-P. Y.).  I’m a small business owner. A serial entrepreneur for 40 years. And if you’re anything like me, this techy stuff could be a little intimidating. So, we’re going to slow down and take a deep breath as we walk through the how’s and why’s of electronic transfer funds via an ACH account.

Further, if you’re like me, didn’t know an ACH from a CBC (oil) this article will diminish the smoke as it becomes crystal clear… pun intended. You will gain enough knowledge to rule ACH electronic transfer practices in or out of your small business financing landscape. ACH wire transferring is another simple technological system that you can set-up in no time that can save you time and money.

man counting money and accounting. ACH is an automatic transfer of funds

As a small business owner, chances are you’re on both ends of ACH transactions. If you have direct withdrawals deducted from your account every month like clockwork, there’s a high probability that it’s processed from an ACH Account transfer.

If You’d Ever Received Direct Deposits, Then You’ve Been on the Receiving End

 Now it’s your turn to learn how to set-up your ACH account so you can detract and send funds to and from your clients automatically. 

OK …Let’s get started by getting an even clearer meaning of ACH.

What Does ACH Mean?

Let’s break it down in layman terms. ACH stands for “automated clearing house”. ACH is an electronic funds-transfer system that facilitates payments by connecting to financial institutions throughout the United States. The ACH is run by the National Automated Clearing House Association (NACHA).

 ACH can be viewed as an underground transportation service. A service built to take passengers (money) from one part of the country to another, in this scenario one bank (or lending institution) to another. 

To build this system took a team of professionals and a boatload of money. The system was built to be secure, safe and fast. ACH is likened to Clorox to bleach it’s the preferred brand. With ACH transferring, you decide if you want to transfer, withdraw, deposit, or any other offered services.

How Does ACH Processing Work?

As a business owner, you may have an interest in electronically sending or receiving payments from contractors, employees or vendors. The steps below walk you through how to initiate the process, However, one thing you will need for certain is an ACH form template.  The ACH form starts the process. It can be sent to the participants, by email, in person, or slow mail.

Step #1. Send the receiver (I.e. Contractor, employee, etc.) an authorization request form for completion.

Step#2. The receiver is required to accurately complete the request form.

Basic information is needed, name, bank address, routing, and account numbers and a voided check.

Step#3. After the form is collected this authorization creates a new ACH account. 

Ach Payment Processing Time

The amount of time it takes to process your request depends on the bank, lending institution, or geographic area. To get an exact time talk with the participating bank personnel. 

Ach Payment vs Wire

 Wondering which is cheaper; ACH transfer or money wiring? That depends on many variables, especially since every bank and lending institutions offer different rates and fees. But overall considering ACH’s security advantages, an electronic ACH transfer can be cheaper but more importantly, more convenient than money wiring transfers. 

Although ACH is cheaper, there are times when we wire money to contractors. It remains to be a faster way to send money to out of town contractors that don’t necessitate us to set-up an ACH. However, it beats sending money by snail mail any day of the week. Even though it’s faster, we end up spending too much money and time sending funds via electronic wiring… it’s speedy but costly.

mail box, representing what we cal snail mail.

 In contrast, ACH transfers are based on percentages of the amount you transfer. It could end up costing as little as .60 for a transfer. For specific amounts and percentages check with your banking representative.

Listed are a few ACH Disadvantages 

  • Increase the chance of security breach
  • Can magnify simple billing errors
  • Tighten supervision on accounts receivable
  • The potential loss of workplace talent
  • A faulty system can negatively impact finances

 Ach Form

Here is an example of an ACH form…  Easy, Peasy… 

ACH example form,used to start the process of automatic deposit and withdrawals

Is ACH safe?

ACH the protocol is monitored and authorized by the National Automated Clearing House Association and the Federal Reserve. ACH is safer than to write monthly checks. Every time you send a check you have an unlimited number of eyes looking at it. And your check not only has your banking information exposed but also your personal information.

Another technological factor, speed is king. The less time it takes to complete a transaction the less time we give cybercriminal to de-code and steal. 

blank check

ACH Business Benefits 

● Freedom to transact business from anywhere.

 ● Easily manage accounts across devices-desktop, phone or tablet.

● Improve accounting accuracy.

● Saves time and money

● Offers a more professional company appearance 

● Reduce paper waste

Conclusion: ACH is an essential technological financial advancement tool. It is simple, easy to set-up, and can be automated. Remember with every action there is an equal or greater reaction, there are risks, but that’s with everything So, if you’re looking for ways to reduce working hours, lessen administrative expenditures, then ACH and automation can play a major role.

One of my biggest concerns was the automated payment deductions. I wanted to retain control over the amounts and frequency of deductions from my account. From my understanding, you can remain in charge of your account.  

One reason for my concern is that we never know when we’ll encounter slow payments from vendors. That could definitely place a cog in the wheel. It’s good to know that you can control the level or degree of automation. The last thing we want is a Big Mess! 

For a more robust account or for international payment processing assistance we’ve listed 3 of the top ACH Processing companies: (in no special order)

Veem

Bill.com

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Deborah Pretty

Hi Everyone! I hope that the article you read today will be used as another building block to further grow your small business empire. PYTalkBiz.com was solely designed to help you reach your business goals, quickly and more efficiently!

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