When you run a small business, your plate is always full. Having a variety of ways to send payments quickly means you can tackle your to-do list and keep things moving.
What you need to know
- ACH stands for Automated Clearing House, a U.S.-based payment network.
- Common uses for ACH transfers include bill payments, tax refunds, payroll, and Social Security benefits.
- ACH transfers typically take 1–3 business days to process.
What is an ACH transfer?
An ACH transfer is an online payment from one banking service provider to another. ACH, or the Automated Clearing House, is a U.S.-based network that provides transfers for the U.S. Virgin Islands, Guam, American Samoa, and the Northern Mariana Islands. ACH transfers account for the online bill payments you make, the direct deposits you receive, and other transfers.
What can I use ACH transfers for?
ACH transfers can give you some flexibility with your small business. Maybe you want to move money between business accounts you own, or you need to pay your vendors—or maybe you want to use ACH to receive payments from your clients or partners.
Here are a few other things you can use ACH transfers for:
- Bill payments
- Payroll
- Social Security benefits
- Tax payments and refunds
How does an ACH transfer work?
Here’s how the process for an ACH transfer works. In this example, your business would be receiving an ACH payment from a customer.
Step 1: You provide the amount due in the form of an invoice.
Step 2: Your customer provides authorization for you to initiate the payment.
Step 3: The customer’s bank debits their account and sends the ACH files to the ACH operator.
Step 4: The ACH operator routes the ACH files to the receiving banking platform.
Step 5: The receiving banking platform processes the payment.
Step 6: Once the funds clear, they’re deposited into your account.
Incoming vs. outgoing ACH
There are two types of ACH transfers.
An ACH debit is when the originator requests to “pull” money from an account they don’t control to their own account (e.g., an automatic bill payment). If you’re originating the request, this type of transfer would be incoming to your account.
An ACH credit is when the originator requests to “push” money from their account to a recipient’s account. What most of us know as “direct deposits” are ACH credit transfers. If you’re originating the request, this type of transfer would be outgoing from your account.
What do I need to send an ACH payment?
Making an ACH transfer is very straightforward. To send an ACH payment, all you need are the recipient’s account and routing numbers.
How long do ACH payments take?
For the most part, ACH transfers take 1–3 business days to process. ACH debits take 1–3 days, while ACH credits usually take as little as one day.
Processing time depends on a few things:
- The time of day when the payment is initiated
- A bank is anticipating the risk of an ACH return
- Errors, like a return for insufficient funds
If you’re looking for a faster option, some business checking accounts offer same-day ACH payments. This is great if you need to hold onto cash longer and get your vendors paid ASAP.
How much do ACH transfers cost?
The average cost for an outgoing ACH transfer is $3.00 (for transfers based in the U.S.), but some business checking accounts offer free incoming and outgoing ACH transfers. ACH network fees are fractions of a penny.
ACH transfer limits
Keep in mind that most banks place limits on:
- How much you can send or receive in a single ACH transaction
- How much you can send or receive in ACH transactions per month
Some bank accounts typically charge an additional fee for more than six monthly transfers or withdrawals.
ACH vs. wire transfers
While wire transfers tend to be faster because of their real-time processing, they’re usually a bit more expensive. You’ll be able to send or receive a payment within hours or even minutes, but a single transaction can cost $15 or more, plus there’s typically an additional fee to receive a transfer. Though, some business checking accounts offer free incoming wires.
One more thing to consider is that wire transfers are irreversible, making them less secure than ACH.
Benefits of using ACH payments
When it comes to ACH transfers, there are plenty of benefits for your business. They come with lower fees and failure rates than accepting credit card payments. They put you in the driver’s seat with more control over transfer dates, frequency, and incoming payment amounts.
On top of all that, they allow you to automate and schedule payments. If you embrace ACH transfers as the primary way to pay your bills and receive payments from your customers, you’ll create efficiencies for your business that will help you stay competitive.
See how Bluevine can save you time and money on business payments.
