Why use ACH payments for your business? Lower costs, streamlined operations, and greater flexibility and convenience are some benefits of using electronic funds transfers.

Businesses across a wide range of industries are increasingly making and receiving payments electronically using the Automated Clearing House (ACH) Network. ACH is a type of electronic funds transfers EFT) that is used to transfer money between bank accounts in the United States. ACH payments are used by consumers and businesses alike, and they’ve skyrocketed in popularity in recent decades.

The National Automated Clearing House Association (NACHA) is responsible for managing the ACH Network. According to NACHA’s latest data, 31.5 billion payments were made on the ACH Network in 2023, for a combined value of $80.1 trillion.

NACHA reports that in 2023, business-to-business ACH payments increased by 10.8% with a total of 6.6 billion payments.

Why are so many businesses turning to electronic transactions? There are several benefits of ACH compared to checks and wire transfers. This article examines how businesses can use ACH, and why it may be the right choice for increasing efficiency within your organization.

3 types of ACH payments for businesses

There are three primary ways in which businesses use ACH payments:

1. Direct deposit: Many businesses no longer issue paper payroll checks to their employees. Instead, they pay them electronically with direct deposit. The government also uses direct deposit to make Social Security payments to recipients and to issue tax refunds.
2. Electronic debits and credits: Debits and credits are B2B payments to vendors and suppliers. This type of ACH payment is also used by consumers to pay recurring bills to businesses. This may include their mortgage, insurance premiums, utility bills and club membership dues.
3. Tax payments: Federal, state and local government entities often allow businesses to pay taxes electronically via ACH instead of mailing in paper payments.

What are the benefits of ACH electronic funds transfers?

The main alternatives to ACH are paper checks, credit or debit cards, and wire transfers. Compared to these options, ACH offers a number of advantages. Below, we dive into five major benefits of ACH vs. checks.

1. Improved cash flow

As a recipient of ACH payments, you’ll no longer hear, “The check is in the mail.” You can rest assured that you’ll receive your funds on the due date and no later. And as a payer, you can hold onto your funds right up until the payment due date. Either way, you’ll enjoy stronger and more predictable cash flow.

On average, ACH payments are processed more quickly than paper checks. They are also much more reliable. With ACH, there’s no need to worry about mail carrier delays impacting your accounts receivables. By knowing exactly when you’ll receive your payment, you can achieve better cash flow forecasting.

2. Lower costs

Whether you’re receiving or disbursing payments, doing so via paper checks is expensive. The Association for Financial Professionals (AFP) found that cost was a top factor for businesses switching to electronic payments, with 45% of respondents in their 2020 survey citing cost savings as a major benefit.

Disbursing payments via check involves a variety of miscellaneous costs—such as check printing, envelopes and postage—that disappear when using ACH. Plus, any additional invoice posting details can accompany the ACH payment electronically via Electronic Data Interchange (EDI).

If you need to send and receive funds quickly, same-day ACH can be a cost-effective alternative to wire transfers. Same-day ACH originations allow you to expedite payments or collections of $1,000,000 or less that require same-day receipts. Same-day ACH also provides you with a contingency option for emergency payrolls and missed payment deadlines.

While domestic wire transfers can cost $20 or more to send, same-day ACH transfers typically only cost a few dollars, at most, making ACH a more economical solution for businesses who frequently need to complete same-day transactions.

3. Greater flexibility and convenience

When you offer ACH as a payment method for your customers, you give them the flexibility of completing a one-time transfer or setting up a recurring payment. By scheduling automatic payments of recurring debits and credits, you and your customers can alleviate the stress that comes from accidentally missing a due date.

Another advantage of electronic funds transfers is the added convenience. Check recipients don’t have to be tied down to the office to sign checks—they can approve ACH payments securely from their online banking portal.

Your employees will also appreciate the convenience of ACH transfers. As of 2021, approximately 96% of Americans were paid via direct deposit, according to the American Payroll Association’s “Getting Paid in America” survey. ACH allows employees to receive their wages on a consistent schedule, without having to deal with the hassle of paper checks and bank visits.

4. Reduced fraud risk

Using ACH makes it harder for employees to commit payment fraud. According to the 2022 AFP Payments Fraud and Control Survey, checks are the payment method most likely to be impacted by fraudulent activity. Since checks clearly display your bank account information, a paper check getting into the wrong hands can be a huge security risk for your company.

Because ACH payments cannot be lost or stolen, they are much safer than checks. And—unlike wire transfers—ACH payments can usually be reversed if you make an error or have reason to believe you are a victim of fraud.

To maximize the security of your ACH payments, follow these best practices:

• Always use dual controls when setting up vendors for ACH payments. This means you’ll have one employee initiate the request and another employee approve. Without dual controls, a dishonest employee could use alternate bank account numbers to make ACH payments to a fraudulent account.
• Restrict employees’ access to view and change ACH settings. Access should only be granted to employees on a need-to-know basis.
• Ensure that your accounting or payroll platform is locked down, secured and has internal multi-authentication in place to help avoid a cybersecurity breach.
• Verbally verify every request for payment instruction changes by calling a known contact listed within your company’s database and confirming all aspects of the requested changes.

Fraudsters are increasingly targeting small businesses and middle-market companies that do not have the same levels of security as large corporations. Partnering with a commercial bank with strong fraud prevention services can greatly increase your levels of protection.

>>Related Reading: Preventing Check Fraud & ACH Fraud With Positive Pay

5. Increased sustainability

Companies across all industries are becoming more and more concerned with how their operations affect the environment. With customers, employees and investors all showing preferences towards eco-friendly companies, corporate sustainability is no longer a trend—it’s the norm.

ACH is a green alternative to writing and processing thousands of paper checks. Not only do you save trees by eliminating paper use—you also eliminate the need to transport checks. If your business is currently writing and receiving checks for the majority of your transactions, switching to ACH could make a significant impact in terms of reducing material usage and carbon emissions.

Optimize the process of making and receiving payments

If your company is not yet taking advantage of ACH, what are you waiting for? ACH is a reliable and convenient way of making and receiving funds. By replacing paper checks with electronic funds transfers, you’ll benefit from predictable cash flow, lower costs and increased security.

If you have questions about how to get started with ACH payments, reach out to a Cadence Bank Treasury Management Officer today. Or, explore our full range of payables management solutions to see what our customized approach to commercial banking can do for your business.

This article is provided as a free service to you and is for general informational purposes only. Cadence Bank makes no representations or warranties as to the accuracy, completeness or timeliness of the content in the article. The article is not intended to provide legal, accounting or tax advice and should not be relied upon for such purposes.