ACH payments can transform your accounts receivable, replacing expensive credit card fees and slow paper checks with direct bank transfers.
Whether you're looking to improve cash flow, reduce processing costs, or offer your customers more payment options, this guide walks you through everything you need to know about accepting ACH payments.
Should your business accept ACH payments?
If your business accepts recurring payments, processes a high volume of transactions, or frequently deals with large payment amounts, ACH transfers could significantly reduce your processing costs and improve your cash flow.
ACH payments are particularly valuable for businesses that want to move away from paper checks or reduce their credit card processing fees.
Many businesses find that offering ACH as a payment method helps them serve customers who prefer to pay directly from their bank accounts. This is especially true for B2B transactions, in which ACH has become the standard for secure, efficient payment processing.
The switch to business ACH payments can also speed up your payment cycle dramatically. Instead of waiting days for checks to arrive by mail and then another week or more for them to clear, ACH payments typically clear in 3-5 business days total.
This predictable timeline helps you better manage cash flow and reduce the time your team spends tracking down payments.
What are ACH payments and how do they work?
ACH payments move money directly between bank accounts through the ACH Network, which processes billions of transactions each year. When your customer authorizes an ACH direct debit payment, their bank (the Originating Depository Financial Institution) sends payment instructions through the ACH Network to your bank (the Receiving Depository Financial Institution).
ACH debit payments are particularly powerful for businesses because you can initiate the transfer once your customer provides authorization. Instead of waiting for customers to remember to send payments, your bank can automatically pull the authorized amount from their account on the schedule you've set. This is why ACH direct debit has become the standard for everything from mortgage payments to business-to-business transactions.
Benefits of accepting ACH payments
From reduced processing costs to improved security, the advantages of ACH payments extend across your entire accounts receivable process.
Lower processing costs
ACH payment processing that comes with a low, flat fee typically costs a mere fraction of what you'd pay for credit card payments, especially for large credit card transactions. This can lead to substantial savings, particularly for businesses that process high-dollar or high-volume payments.
Faster payment processing
While paper checks can take days or weeks to arrive by mail and clear the bank, ACH payments move directly between bank accounts through the automated clearing house network. Even with standard ACH processing times, you'll typically receive funds faster than you would with paper checks, helping to speed up your cash flow cycle.
Enhanced payment security
ACH payments are processed through a highly regulated, bank-to-bank network with multiple security protocols. Unlike paper checks, which can be lost or stolen, or credit cards, which can be compromised, ACH transactions are encrypted and processed through secure banking channels, reducing the risk of fraud and unauthorized payments.
Improved cash flow management
Because ACH payments follow a predictable processing schedule, you can better forecast when funds will hit your account. This predictability, combined with faster processing compared to paper checks, gives you more control over your cash flow. You can also set up recurring ACH payments for regular customers, ensuring steady, reliable income.
Better customer experience
ACH payments offer your customers a convenient, hassle-free way to pay. They don't need to write checks, mail payments, or update credit card information when cards expire. For recurring payments, customers can set up automatic ACH payments and never worry about missing a payment or incurring late fees. This convenience can lead to higher customer satisfaction and retention rates.
Common challenges of accepting ACH payments
While ACH payments offer significant benefits, businesses may face several challenges when implementing and managing them without the right payment platform. Understanding these hurdles can help you choose a payment solution that addresses them effectively, ensuring a smooth transition for both your team and your customers.
Manual payment processing time
Processing ACH payments without automation can eat up significant hours initiating transactions, updating records, and answering payment status questions. Teams also run the risk of introducing human error when manually entering payment information, updating transaction status, and maintaining records across multiple systems.
Payment tracking and reconciliation
Tracking ACH payments and reconciling them with invoices becomes more complex as transaction volumes grow. Financial teams may find themselves jumping between banking portals, spreadsheets, and accounting software just to match payments with invoices—and struggling with a slow monthly close.
Limited payment visibility
Without a centralized payment platform, businesses struggle to maintain clear visibility into their ACH payment status and history. This lack of transparency makes it challenging to answer customer questions about payment status, forecast cash flow accurately, or quickly identify and resolve payment issues.
Disconnected accounting systems
When ACH payment data doesn’t sync with accounting software, teams are forced to enter bill pay information manually into their accounting system, creating duplicate work and increasing the risk of data entry errors.
Payment security concerns
ACH payments involve sensitive bank account information—making security a potential concern for both you and your customers as well as introducing the challenge of keeping each customer's bank account info up to date when they change banks.
How to accept ACH payments
Setting up ACH payments for your business involves several key steps, but the process is straightforward when you work with the right payment processor. Here's a step-by-step guide to help you get started.
1. Set up a business bank account
Before you can accept ACH payments, you'll need a dedicated business checking account. Look for an account that offers robust online banking features and integrates well with your accounting software—the more you can automate your financial systems, the better.
2. Partner with an ACH processor
An ACH processor acts as the intermediary between your business and the ACH network. It handles the technical aspects of processing payments and ensuring security compliance. Choose a processor with features that match your business needs, such as automation capabilities, accounting software integration, and fraud prevention tools.
3. Verify your business
ACH processors are required to verify the identity and legitimacy of the businesses they work with. You'll typically need to provide your business tax ID and banking information. Some processors may also review your processing history and financial statements to assess risk levels.
4. Connect your bank account
Once your business is verified, you'll connect your business bank account to your ACH processor. Most modern processors use secure, encrypted connections that verify your account instantly. This connection allows the processor to send and receive ACH payments on your behalf.
5. Configure your payment system (optional)
Depending on your processor, you may have options to customize your payment setup. This could include setting up recurring payment schedules, creating automated payment reminders, or configuring approval workflows. While optional, these features can help streamline your payment process.
6. Invite your customers
The final step is to start accepting ACH payments from your customers. Many processors provide tools to help you onboard customers, including automated verification processes and secure forms so they can enter their bank information directly.
How to accept recurring ACH payments
Recurring ACH payments add another layer of automation to your payment processing, helping you maintain steady cash flow while reducing administrative work.
Modern payment platforms make it easy to set up recurring payments by automating both the initial authorization and the ongoing payment schedule. Your customers simply provide their bank information once, authorize the recurring payments, and their payments process automatically according to the schedule you've set.
Accept ACH payments instantly with BILL
BILL's payment platform streamlines the entire ACH payment process, from customer onboarding to payment reconciliation:
- Significantly reduce manual work
- Get paid faster than paper checks
- Track payment status in real time
- Sync with your accounting system
- Automate recurring payments
See what our customers have to say
Speed up your payments and improve customer and vendor relationships with ACH and virtual cards* from BILL.
“When things are going well, you don't hear from anybody—but when they're not going well, you hear from people all the time. And it’s been a good sign that we're not hearing from anybody. Payments are going out the way they're supposed to.” — Church Community Housing Corporation
*The BILL Divvy Card is issued by Cross River Bank, Member FDIC, and is not a deposit product.
