ACH Payments: A Quick Guide to Setting Up and Using ACH Payments in B2B Transactions
This is a writing sample from Scripted writer Anthony Sillemon
The Automated Clearing House (ACH) is a fast, reliable means of electronically moving funds across businesses. Business-to-business (B2B) transactions have grown increasingly common as businesses continue to rapidly embrace technology and exploit its benefits.
To successfully set up and use ACH B2B payments, select and designate an ACH processor, set up a merchant or business bank account, and then encourage your customers to use ACH. Be careful in the first two steps. A simple mistake can lead to costly messes when it comes to digital payments.
This article takes you through the steps involved in setting up and using ACH payments in B2B payments. The steps are explained in detail with a major focus on the associated risks.
ACH Overview
Before diving into the intricacies of setting up ACH for B2B transactions, a little warm-up on the topic is an excellent idea. Automated Clearing House is an electronic network for moving money between bank accounts. This network is run by an organization known as NACHA. The ACH network is also commonly referred to as the ACH scheme or the ACH network.
ACH has been around since the 70s, serving different businesses. The network handles government, individual consumer, business-to-business, and international transactions. In 2021, the ACH network handled transactions worth more than $72.6 trillion. This network is speedy because transactions do not go through old-school card networks such as visa and MasterCard. They are electronically routed through the ACH network.
Businesses can accept or make payments anytime, anywhere, through computerized electronic devices. Below are the simple steps to follow to set up an ACH account.
How to Set Up ACH Payments
Step 1: Select a Payment Processor/Clearing House
Before setting up the account, you need to understand the available ACH payment processing providers, also known as ACH clearing houses. The common payment processors include:
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Merchant Services Provider
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Business Banking Service
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Payment Service Provider (PSP)
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High-Risk Processor
The main considerations here are the fees charged, reputation, and risk. Hints on selecting these processors can be found at the bottom of this article.
Step 2: Set Up Your ACH Account
There are two options: set up a merchant account or use your bank account for ACH transactions. If you already have a merchant account, simply add it as a payment option on ACH. If you prefer the bank, you must set up a business account. Once you have your business account, you must share your bank’s routing number and account with your customers. Again, take time to read the terms and conditions to avoid costly compromises.
Step 3: Talk to Your Customers About ACH Payments
The essence of joining the ACH network is having customers use it, right? You need to make a convincing case by highlighting its advantages. Talk of lower operating fees compared to credit cards, speed, convenience, and security. Regarding security, you must tread carefully when selecting the clearing house or processor. Some processors have security loopholes that can expose your bank account to malicious activity. Hints on selecting the right processor can be found at the end of the article.
Step 4: Share Payment Information With Customers
After getting your B2B customers to sign up for ACH payments, you’ll need to share your bank account number with them. This information is required when initiating an ACH payment. Also, you will need routing numbers for some banks and corresponding bank branches. Let the customers know that you prefer ACH payments over credit card payments or paper checks.
Step 5: Start Paying and Accepting Payment Through ACH
After laying down the groundwork, you are good to go. You have a payment processor, an active merchant, or a bank account. You have let your customers know that you are accepting ACH payments. To increase the chances of customers using this option, make it known to them. Highlight the ACH payment details on your business website, checkout page, and invoices you mail to other businesses.
Step 6: Get More Customers to Join ACH
To make this effort fruitful, you need to lure many businesses you transact with into the network. Some hints include:
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Invite all new customers to the ACH network
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Encourage all customers to pay via ACH
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Make an effort to educate your customers on the benefits of ACH
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Insist on paying your suppliers via ACH
Tips on Selecting the Right ACH Processor
Of course, before selecting a processor, you must be well-versed with the payment authorization avenues possible on ACH. The authorization channel is a major determinant of security, and you can use this to identify the most favorable processor.
These transactions are authorized through four main avenues:
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PDD: Written permission to have funds debited or credited from a bank account via the ACH
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WEB: Over the internet, authorization of ACH debit or credit transactions
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TEL: Over-the-phone authorization of ACH transactions
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ARC or BOC: A written paper check constitutes authorization.
Analyzing and comparing the workflow of different processors can also aid in selecting the one that suits you. Some processors are more suitable for small businesses, while others are more convenient for midsized and larger multinationals.
Take time to read the terms and conditions to ensure you do not unknowingly make costly security compromises. Take your time to establish what best suits you. Some reputable ACH processors include Payment Depot, Helcim, Stripe, GoCardless, and Square Invoices.
How ACH Works: The ACH Loop
There are basically five parties in the ACH payment loop:
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The Originator
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Depository Financing Institution (ODFI)
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The ACH Operator
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The Receiving Depository Financing Institution (RDFI)
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The Receiver
To initiate a payment, the originator sends a data file containing information about the payment to his or her bank. This bank forwards this file to a clearinghouse that seeks approval to transfer funds. The clearinghouse then sends this file to the receiver’s bank, requesting approval to transfer funds. The receiver’s bank will seek the receiver’s approval, which transfers funds to the clearing house. The clearinghouse then transfers the payment to the originator’s bank, and this loop completes the payment.
Conclusion
Setting up an ACH account and using it for B2B payments has numerous advantages. This payment method is cost-effective, fast, reliable safe. You need to find as much as possible about these payments to avoid pitfalls that can cause security compromises.
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