What Are the Benefits of Automated Clearing House (ACH) Payments?

If you run a business that frequently accepts customer payments, then you need a simple payment processing solution.

You want something easy to use, understand, and manage. You should also accept the payment options your customers want because this will greatly improve their experience.

The best strategy for this is to begin accepting automated clearing house (ACH) payments. Also referred to as direct deposit, ACH payments are a straight transfer between two bank accounts.

In your case, this will be the account of a customer and your business account. Compared to paper checks or credit cards, ACH payments are far more reliable and provide several additional benefits. 

To encourage you to look into accepting ACH payments, we’ll explain why doing so is advantageous below. 

Streamlined Transactions

One of the greatest perks of accepting ACH payments is streamlined transactions.

Checks and credit cards are useful forms of payment, but they are typically quite slow to process. This is because they require initiation to transfer funds.

When someone purchases something with a credit card, you must wait for approval from their bank before funds will be dispersed.

On the other hand, an ACH payment is the initiation of a transfer. It bypasses the waiting period because it is directly requesting funds from the customer’s bank account.

With this in mind, ACH payments are much faster. They are often completed same-day, meaning that you’ll have quicker access to earnings. 

Meeting Consumer Preferences

As we briefly touched on above, accepting ACH payments meets your consumer’s preferences.

In addition to benefiting your business, there are also good reasons for a consumer to make an ACH payment. Specifically, it automates monthly payments, which prevents a customer from forgetting to pay or needing to go through the process of mailing a physical check.

The easier it is for your customers to pay, the more likely they are to make a purchase. 

Imagine shopping on two different websites; one has a checkout process requiring just a few clicks and entries taking less than a minute, while the other is an extensive and confusing checkout process with several prompts and verifications.

Assuming the two sell identical products and have similar brand awareness, which website will have better sales? It’s the website with a simplified checkout process. ACH payments enable this and it’s what your customer wants. 

Increased Visibility

ACH payments also allow for increased visibility of the transaction process.

Another issue with other payment methods like credit cards and checks is that they limit how much you can see. This comes down to the process of transferring funds and how long it takes.

When a customer purchases something with a credit card, you must give them what they’ve bought. However, you do not yet have access to the funds that running their card has promised you. 

Funds from a credit card transaction can often take several days to transfer. This means that your bank account balance won’t change until then, which will understate how much you have.

On the other side of this, if you make payments to suppliers and vendors via credit card, then your balance can be overstated.

Either scenario involves an inaccurate reflection of your financial status. Due to how quickly ACH payments are processed, you’ll often have a correct idea of your bank balance at the end of each day.

Cost Savings

A final benefit of accepting ACH payments is cost savings.

While debit and credit card payments are arguably more convenient, they do come at a price. For each transaction, you typically have to pay a percentage to your merchant account provider.

Depending on the volume of your sales, this figure can quickly get expensive. Many merchant account providers charge around 3-4% per transaction on top of a small flat fee.

Basic math will show you that this eats up a large percentage of your income. You also likely know this because you’ve been paying for credit card transaction fees for as long as you’ve accepted credit card payments. 

ACH payments provide a great alternative here because they are much cheaper. Rather than a sizable percentage and flat fee, the cost to process an average ACH payment is less than a quarter.

Compare this to 4% on a $100 sale and you can see that $4 is far more expensive than 0.25¢. This perfectly illustrates how much more cost-effective it is to accept ACH payments. 

Closing Thoughts

Automated clearing house (ACH) payments are a fantastic alternative for accepting money from your customers. Rather than waiting for a lengthy transaction process, ACH payments are quick and direct.

A few other benefits of ACH payments include streamlined transactions, meeting consumer preferences, increased visibility, and cost savings over other payment processing methods.
If you want more real-time control over your sales revenue, then you need to start accepting ACH payments. Aside from an initial start-up cost that pays for itself several times over, there are no drawbacks to allowing them!