What is ACH Payment Processing for Small Businesses?

ACH payment processing helps your small business process payments quickly and securely, giving you an edge over your competition.

ACH stands for “automated clearing house”. Governed by the National Automated Clearing House Association (NACHA), the automated clearing house quickly processes each transaction electronically, eliminates the need for a paper check, and costs less than credit card processing.

We field questions every day about how ACH Payment Processing works. We’ve chosen the most common ones to help you understand more clearly how ACH processing can have a positive impact on your business compared to other payment solutions.

1. How does ACH payment processing work?
2. How can ACH payment processing help my business?
3. Is enabling ACH payment processing worth it?
4. What are the Best ACH payment processing options for small businesses?
5. How do I get access to ACH Payment Processing?

How Does ACH Payment Processing Work?

ACH payments can help your small business with quick and secure electronic payment processing. To keep it simple, ACH payment processing are used to move money directly from one bank account to another (essentially bank transfers). This is in contrast to using card payments, where you will end up dealing with a variety of card networks. The funds move expediently through the ACH Network,  with the funds deposited into the receiving bank account within a few business days. It moves funds without needing to use a physical check, credit card, or debit card.

ACH payment processing has a number of advantages over credit card transactions for small businesses. For starters, it is particularly helpful for paying recurring bills. Direct Payment through ACH can help customers pay for services. They can pay through ACH Credit or ACH Debit. ACH Credit pushes the funds to an account, while ACH Debit debits the account. A customer would use ACH Debit for recurring bills they want to put on autopay. ACH Credit can be utilized for making a one-time payment. Finally, ACH transactions can also be used for online payments.

As for the process itself, there are a number of ways that ACH transactions can work. Consider the scenarios below.

ACH payment processing scenario #1: Transfers between individuals

Let’s say you have a client that wants to send you a one-time payment via ACH. Here’s how the process would typically work.

1. The payer initiates an ACH transfer from their bank (known in this case as the Originating Depository Financial Institution or ODFI).
2. The payer provides the necessary payment information, including the receiver’s account number, payment amount, etc.
3. The ODFI debits the payer’s bank account.
4. The ODFI sends the ACH files to the network, where it is routed to the Receiving Depository Financial Institution or RDFI.
5. The RDFI credits the receiver’s account with the amount via Direct Deposit.

ACH payment processing scenario #2: Using a payment processing platform

If you intend to receive ACH payments on a regular basis (i.e., through recurring payments or a similar setup), you can automate bill payments for your customers through the right payments provider. Here’s how that process would typically work:

1. Set up an ACH merchant account. If you’re already accepting credit cards, see if you can process ACH payments through your existing merchant services provider. At Stax, for example, our all-in-one payments platform supports multiple payment methods including credit and debit cards, ACH, eChecks, and more.
2. Request for authorization from your customers. Your customers can authorize ACH transactions by filling out a form (such as a PDF document) or through an online portal. Customers would need to provide the following account information:
   • Bank name
   • Account type (checking account or savings)
   • Account number
   • Routing number
3. Enter your customers’ payment details into your ACH system.
4. Your processor will take care of initiating transactions at the right time.

Also Check Out: The Importance of Web Payments and ACH Payment Processing for Law Firms

How Can ACH Payment Processing Help My Business?

ACH Payment Processing saves your business time and money by allowing you to easily track expenses and cash flow. This can be particularly helpful if you use recurring billing or invoicing. These are free for customers making them a better alternative to wire transfers. Best of all, it is less costly, saving your business money.

1. Better ACH payment processing fees

If you use a traditional credit card processor, you could be paying more through extra processing fees. Interchange rates for each type of credit card vary but the more cards your business processes through traditional means, the more you’ll pay.

ACH Payment Processing is less expensive for the business conducting the transaction than paying with a credit card. Your small business will pay 1% per transaction, no matter the size of the transaction, making ACH transactions very cost-effective. You’ll be able to easily track each incoming payment while saving on processing fees.

2. Easy ACH set-up for customers

You’ll find that many customers prefer ACH Payment Processing because it’s user-friendly. To use ACH Payment Processing, all you need is your customer’s banking information. With the one-time entry of their account and routing numbers, your customers can pay your invoices at whichever interval you choose. Each payment will be automatically deducted from their account, making timely payments easy. Customers no longer have to manually pay invoices and it doesn’t cost them anything extra.

3. No More Expired Credit Cards

Unlike credit cards that regularly expire or have the number changed after a suspected fraud attempt, your customers’ bank account and routing number will likely remain the same for years. This means you won’t have to chase down updated payment information.  You’ll save time on manual operations tasks by letting customers set up ACH on their own. That means that companies on a monthly subscription model greatly benefit from accepting ACH payments.

Is ACH Processing Worth It?

A little math is all it takes to find out if ACH Payment Processing could help your small business. Determine the cost of accepting ACH payments with your payment provider. Then, add up how much you’re spending on interchange and credit card processing. Compare the two to see how much your small business can save.

For example, say a marketing agency has 10 clients that are billed $2,000 each per month. With most credit card processors, there would be a 2.9% + .30¢ fee to process each transaction. At this rate, it would cost your business $583 a month to process these invoices through traditional credit card processing.

With Stax, you would only pay $100 to process the same 10 payments. That’s a savings of over $483 a month and almost $5,800 a year. We know for small and medium-sized businesses, every penny counts – and that’s a lot of pennies. 

How Do I Get ACH Payment Processing?

You can access ACH Payment Processing and all of its benefits through a payment processor. Payment processors facilitate the actual payment and deposit the money directly into your account. Using this, instead of traditional credit card processing, lowers your overall processing costs.

Stax is a subscription-based ACH Payment Processor. With a subscription-based payment processor, you’ll pay a one-time transaction fee no matter how big the transaction is. Whether your customers need one-time payment or recurring billing, Stax can handle all of your payment processing needs. We provide full you with the full functionality to accept a variety of payment types. You can easily set up ACH through a virtual terminal and accurately track your payments.

Stax customers can contact an account manager and request to turn on ACH Payment Processing. Customers can also do this by logging into the Stax dashboard and clicking on the Apps section. Find and click the ACH app and click the Contact button to reach our support team.