ACH direct deposit and withdrawal details are thoroughly explained in 5 minutes. If you’re wondering what ACH means, what are the benefits and disadvantages, are they safe, and most importantly how ACH services can boost sales and productivity, you’re on the Right Page!
Hi, I’m P.Y., a small business owner and 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 electronic transfer practices in or out of your small business financing landscape. wire transferring is another simple technological system that you can set up in no time that can save you time and money.
As a small business owner, chances are you’re on both ends of 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 digital banking method so you can detract and send funds to and from your clients automatically.
OK …Let’s get started …
What Does ACH Mean?
Let’s break it down in layman’s terms. ACH stands for “automated clearing house”. It’s 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).
Additionally, it 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.
Building 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 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 a form template. This form starts the process. It can be sent to the participants, by email, in person, or in 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, account numbers, and a voided check.
Step#3. After the form is collected this authorization creates a new ACH account.
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.
Electronic Transfer vs Wire
Wondering which is cheaper; electronic 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 transfer can be cheaper but more importantly, more convenient than money wiring transfers.
Although an electronic transfer 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.
In contrast, wiring money is 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 Disadvantages
- Increase the chance of a 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
Here is a form template form… Easy, Peasy…
Is ACH safe?
ACH protocol is monitored and authorized by the National Automated Clearing House Association and the Federal Reserve. It’s safer than writing 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 cybercriminals to de-code and steal.
● 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
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, and lessen administrative expenditures, digital banking 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)
ACH The Advantages, Benefits, and Disadvantages
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