How Your Business Can Accept ACH Payments

If you own a business that regularly collects payments from customers or you have routine transactions between yourself and other businesses, you might be looking to improve how you send and receive money electronically.

One option is Automated Clearing House (ACH) payments, which are a secure and efficient way to transfer money. ACH could help you collect recurring payments from customers and facilitate direct deposits, like paychecks for your employees. ACH payments can also save you money on transactions compared to the high processing fees associated with credit card payments.

Keep reading to learn more about ACH payments, their benefits, setup requirements and steps to take so you can start accepting them as part of your business.

What are ACH payments?

ACH payments are electronic transfers between banks and credit unions using the ACH network. There are a range of common uses, including for customer payments, recurring billing and business-to-business (B2B) transactions. Here’s a closer look:

• Customer payments: If you have an online billing option for customers, you could set up ACH payments instead of credit card payments, which could save you money on processing fees.
• Recurring billing: ACH payments are useful if you provide a service that bills people monthly, say, for a subscription to your website or a utility bill. With ACH payments, you could get customer permission to deduct a recurring amount from their checking account each month.
• B2B transactions: Transactions are conducted between two businesses instead of a business and a consumer. For example, if you are a small specialty grocer who buys product from a wholesaler, or you own a bakery and buy your ingredients from a variety of other small businesses. If you deal with regular B2B transactions, you’ll likely need to use some form of electronic payment, and ACH could help.

Benefits of accepting ACH payments

There are a range of advantages for business that use ACH payments. Here are some of the most common:

• Lower processing costs compared to credit cards: Credit cards typically have a processing fee between 1.5% and 3.5% of each transaction. ACH payments typically have lower processing fees, although it depends on the processor.
• Convenient for recurring payments: For customers that have subscriptions or recurring invoices, ACH payments are an efficient way to pay a bill each month or debit regular payments.
• Secure and widely used payment method: ACH payments are used among banks, credit unions and a wide variety of businesses because they are a safe and efficient way to send and receive money electronically, typically within a few days.
• Faster than paper checks: Paying by paper check could take significantly more time. Beyond sending a check through the mail system, a business owner would have to spend time depositing the check at a bank branch or through an online portal.

What your business needs to accept ACH payments

In order for your business to accept ACH payments, there are some basic requirements.

To start, you will need a dedicated business bank account where you can receive payments from customers and facilitate B2B transactions. You want to have a separate bank account for your business transactions so that you can keep your expenses and payments all in one place for billing, accounting and tax purposes.

To set up a business account that can facilitate ACH payments, you’ll need a partnership with a bank, payment processer or ACH provider. Once you have an ACH partner, you can set up an account that accepts ACH payments from consumers or other businesses. Before you can accept payments from consumers, you’ll want to make sure you ask for their authorization to debit their account. This usually requires getting their permission along with their account and routing numbers.

National Automated Clearinghouse Association (NACHA), is the ACH governing body that oversees the ACH network. If you accept ACH payments as a business, NACHA requires you to comply with their rules.

How to set up ACH payments for your business

Setting up ACH payments for your business can be done in a few simple steps. 

1. Choose a bank or payment processor that offers ACH services. You may want to choose a bank you’ve partnered with in the past if you have a good working relationship with them.
2. Complete the setup and provide business documentation.
3. Establish authorization methods for customers using forms or online agreements. This will ensure that you have permission to facilitate ACH payments for your customers. The ACH authorization form typically includes the account holder’s personal information, banking details and signature.
4. Integrate ACH options into your invoicing, billing or payment system. If you have questions about how to do this, you could reach out to your bank, credit union or ACH provider.

Once you have completed these steps, you should be ready to accept ACH payments.

Costs and processing times for ACH payments

If you are interested in using ACH payments, you may be wondering about costs and processing times. ACH fees are typically lower than standard credit card fees, with a flat rate per transaction, although costs vary between providers.

Processing times usually take 1–3 business days, with same-day ACH becoming more common, although ACH payments generally do not go through on weekends or holidays.

ACH payments could improve your business

Setting up your business to make and accept ACH payments may be efficient and cost-effective in the long run. Once you are more familiar with the ins and outs of ACH payments, carefully consider the benefits and make sure they align with your business priorities. Take steps to set up payments and see if your processing times, fees and overall billing experience improves.

Disclosure: This article is for general educational purposes. It is not intended to provide financial advice. It also is not intended to describe or indicate the availability of any Citi product or service. You should refer to the terms and conditions financial institution provide for various products.