The Benefits to Business of Automated Clearing House (ACH) Processing
Businesses of any kind, Web-based or otherwise, can get huge benefits, including direct savings and a much wider customer base, from using Automated Clearing House processing to move funds electronically.
ACH providers, of which Paypal (www.paypal.com) is probably the most famous, although there are many cheaper alternatives, offer a means of accepting and issuing payments from checking or savings accounts electronically. With an ACH payment, a customer's account is debited, and the funds are then credited to the trader or supplier's account. The most immediate advantage, particularly to Internet companies, is that ACH gives access to their products and services to the large number of consumers who do not have credit cards, and to those who do have credit cards, but have reached their credit limit. If these people have a checking or savings account, they can still become customers with ACH. In other words, implementing an ACH system dramatically broadens your customer base in one move.
The great advantage of credit card transactions is that, once the transaction is approved, the credit card company guarantees that you will receive the funds. However, this guarantee comes at a high cost, and there is still no full protection against charge back, for which reason banks withhold payment to your business for much longer. For an average $100 credit card transaction, you are likely to pay around 2.35% on top of the $0.30 transaction fee, making a total of $2.65 per transaction. A similar ACH transaction will cost only the $0.30 transaction fee.
While ACH cannot provide the same level of guarantee that credit cards do, the vast majority of risks, including bounced payments and closed accounts, can be minimized using modern fraud screening and collection tools that make it possible to get real time verification that account numbers are valid and that there are funds in the account. These tools vary according to the ACH processor and, when choosing your provider, you should ensure that they have adequate screening tools, sufficient experience, a client list, and well designed web integration tools.
The savings compared to credit cards are particularly relevant to companies that take monthly fees or regular payments from their customers. And, with ACH, your business can enjoy the benefits of a much shorter charge back window compare with credit cards. ACH processing also represents big savings in comparison with paper checks. Many banks charge up to $30 for Non-Sufficient Funds (NSF) on paper checks, while the average ACH processor charges as little as a dollar or two. ACH processing will also allow you to get your money faster, will let you see NSFs more quickly, and will save you the time and effort of physically presenting checks at your bank.
Businesses also now have authorization from NACHA (www.nacha.org), the organization which governs electronic transactions, to take authorization for payments by phone, and electronically debit a customer's account. Again, this provides a new method of payment for customers, which saves them costs on postage, and you costs on invoicing. The same applies to payments made by your business to affiliates, employees and suppliers which, if paid by check, are costing you in unnecessary postage fees, too.
For all these reasons, provided you use adequate verification services, ACH processing of payments can save time and money for you and your customers, and can open up your business to a huge new market of customers unwilling or unable to access your goods and services with a credit card. ACH really is an essential tool for most businesses.
