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ACH: Is it Time to Make the Switch?

July 27, 2016 in Small Business and Entrepreneurship, LIVE Consulting Culture and Processes

You may have been approached by vendors lately about paying via ACH.  For both businesses and customers, there are many advantages to collecting and paying this way.  Businesses are looking to get paid more promptly, go paperless, and reduce banking fees.  ACH allows them to do all that and if you’re paying via ACH, it makes you a much better partner for them.  

What is ACH?

An ACH (Automated Clearing House) transaction is simply moving funds electronically from one bank account to another.  This is accomplished by using the unique routing and account numbers associated with your bank account.  You do this all the time without really knowing it.  Have you ever been asked to pay via check over the phone?  Do you use an online bill pay service at your bank where you’re shown your vendor will receive their funds in one day?  Do you direct deposit your employees’ pay checks?  These are all different forms of ACH payments.

How is ACH More Cost Effective?

The costs associated with other payment types are often passed on to the customer in one form or another.  Because of fees, credit cards are the most expensive form of payment around.  If you do a lot of small dollar transactions the fee per transaction is not too bad, but big dollar transactions are expensive since the fees are a percentage of the charge total. For example, a $53 charge will cost you about $1.22.  Most companies accept this because they get the cash so much faster.  It costs you about $1.22 to process a paper check payment, plus, there is the time “in the mail” and all the required tracking down and monitoring .This is expensive, time intensive, and can drastically lengthen the total days to collect.  On average, it costs about $0.55 to process an ACH charge.  This is a flat per transaction fee so it is especially cost effective if you have larger business to business transactions.

How Convenient is ACH?

ACH transactions are VERY convenient for both the payer and payee.  We already send electronic invoices so there is no opening and processing paper mail involved.  No one has to go to the bank, print, track down signers, stuff envelopes, put on stamps), or mail checks.  There is money to be saved on the payer side here as the ACH costs you nothing and the above list of supplies obviously cost money.  Plus, as the payer you don’t have to schedule or process payments so you can avoid any late fees.  The charge comes through and the payer matches it to the invoice in their email and enters the charge in their system and they’re done.  This is obviously much less time intensive on the payer side.  Basically, once you set it up you can forget about it.  You authorize the billing schedule and can even set dollar limits so there are no surprises for you as the payer. 

How Secure is ACH?

It can be scary to share your bank account information.  However, this is actually more secure than you might first think.  This bank account information is entered into a bank secure system and encrypted.  When you send a paper check it contains all the same information and it passes through many hands and can even get “lost” and then many people have the information.  Again, the payer can set all the restrictions on how and when an ACH is processed so it is much like a paper check in that way but now you can Go Green and save on all the paper and postage costs at the same time you are restricting who has access to your banking information.

No surprise here, LIVE Consulting  is now offering customers the ability to pay via ACH.  Email me at angie@liveconsulting.com  or give me a buzz if you have questions or concerns.


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Angie O'Connell

Angie O'Connell

Angie earned an BA in Arts & Humanities, and an MS in Finance. Here at LIVE, she controls finances, works with vendors, enters data and talks to clients about billing questions. Angie has lived basically her entire life in Colorado and most of it in Arvada. She met her husband in Ft. Collins during college and they have been married for 25 years.They have 2 grown kids and they are Angie's greatest joy and pride. She loves spending time with family, just hanging out, and enjoying movies, music, and books.

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