How To Set Up ACH Payments For Your Business: The Step-By-Step Guide

Q: What happens if an ACH transfer fails?

When an ACH transfer fails, it is known as an ACH return . You’ll probably be notified of the return within 2-4 days of the attempted transaction, and you’ll likely be charged a return fee from $2-$5. If a customer disputes a transaction and it is returned, you’ll be charged an additional fee.

Is accepting ACH payments right for your small business? Read everything about ACH payments in this guide.

Kate Hoots
Expert Analyst & Reviewer
Aug 31, 2022
UPDATED

Advertiser Disclosure: Our unbiased reviews and content are supported in part by , and we adhere to strict to preserve editorial integrity.

How to accept ACH payments

ACH payments are safe, easy, and reliable. If you’re not already using them, it may be time for your small business to start accepting ACH payments. This post will cover everything you need to know about how to set up ACH payments, including need-to-know details about ACH fees.

But first, if you’re still researching ACH payments and wondering if you should set up ACH payments for your small business, start with our basic guide to ACH payments. (You’ll learn, for example, that ACH stands for Automated Clearing House, an electronic payment network run by an organization called Nacha that monitors member banks and credit unions and enforces ACH standards.)

Once you understand these ACH basics, you’ll be ready to learn how to set up ACH payments. So keep reading for a deep dive into the world of ACH payments, including how to find ACH payment processors, suggestions for using ACH payments to save time and money, and what your small business can expect to pay for ACH services.

Table of Contents

Why Accept ACH Payments For Your Small Business?
ACH Payment Processing Fees Explained
What Do You Need To Accept ACH Payments?
How To Set Up & Accept ACH Payments
How To Get Your Customers To Pay By ACH
Is Accepting ACH Payments Right For Your Business?
Next Steps For Accepting ACH Payments
Common Questions About Setting Up ACH Payments

Why Accept ACH Payments For Your Small Business?

Accepting ACH payments brings several benefits to your small business receivables. Here are some of the top advantages of using ACH payments instead of credit cards or checks:

Lower Fees — Or None At All

The average cost of processing a credit card payment ranges from 1.5%-3.5% of the total transaction value, as reported by Bankrate.com. According to Nacha, the ACH governing body, the median cost of sending or receiving an ACH payment is between $0.26-$0.50. That’s a bargain compared to the costs of receiving a paper check, which Nacha says has a median cost of $1.01-$2.

Your ACH fees will depend on how your business processes ACH payments. We’ve included cost ranges in our list of the best ACH payment providers. Of course, if you use one of the options included in our list of the best business banks, you could pay $0 for ACH processing.

No Limits

If you use a business bank account to process ACH payments, you’ll probably be allowed to accept unlimited incoming payment, potentially with no fees. Most business bank accounts put limits on the number of paper checks you can accept each month, and many business bank accounts don’t accept cash deposits at all.

Faster Payouts

Wire payments process faster than ACH, it’s true. But those can be costly. However, when it comes to paper checks, there’s no comparison to ACH processing times. Although it can take several days for an ACH payment to be processed, once the transaction reaches your bank the money is yours to access.

Paper checks, on the other hand, typically spend a couple of days or more traveling to your mailbox. Once your accounting department deposits the check, your bank likely will hold the funds for two or more business days. And unlike paper checks, ACH payments never get lost in the mail.

In some cases, you may even be able to access same-day ACH processing! Nacha has set a limit of $1 million per transaction for same-day ACH, and you may have to pay a fee for same-day transactions.

Greater Security

A fraud report created by the Association for Financial Professionals and backed by JPMorgan Chase & Co. shows that the risk of fraud is about 30% less with payment via ACH than with payment via check.

In even better news for small businesses, the report also notes that large companies are more susceptible to ACH fraud than small businesses. That means ACH is a secure payment method for your small business.

Customer Convenience

ACH payments are as cost-effective, safe, and easy for customers to send as they are for your small business to receive.

The majority of banks allow fee-free bill payment, which is usually a form of ACH payment. Those payments are less likely to lead to fraud situations, like identity theft. And ACH payments are easy to track, unlike a paper check that gets sent — and could get lost — in the mail.

ACH is a great option, too, for customers who can’t or don’t want to use credit cards. Giving them the option to pay via ACH could even increase your sales.

Fewer Disputes & Quicker Settlments

Customers typically have only 90 days to dispute an ACH payment, compared to 120 days to dispute a credit card payment.

And the rules for chargebacks or reversals are stricter for ACH payments than for credit card payments, In fact, there are only three reasons customers can initiate a reversal or chargeback for an ACH payment:

The transaction was never authorized or the authorization was revoked.
The transaction was processed on an earlier date than authorized.
The transaction was for an amount different than what was authorized.

Suitable For B2B Sales

ACH is a great option for business-to-business transactions. That includes customers who make one-time or occasional purchases and those who want to pay on an installment plan.

ACH payments are also ideal for those making recurring payments, such as subscription fees, regular invoices, membership costs, rent payments, or service fees for coaching or maintenance services. They can set up an ACH payment one time and never think about it again, and you’ll receive payments on time, at the right intervals, without having to send reminder invoices.

What about those one-time purchases? B2B transactions sometimes involve pretty hefty sums for equipment or inventory. ACH payments can handle those transactions easily, without the hassle of paper checks or the fees associated with credit card use.

ACH Payment Processing Fees Explained

ACH processing fees deliver a major advantage when compared to credit card processing costs and the fees associated with depositing checks and even cash. Like all types of payment processing fees, ACH processing fees come in a range that depends on what processor you use:

Merchant Services Provider
Business Banking Service
Payment Service Provider (PSP)
High-Risk Processor

With the understanding that ACH fees can vary, let’s take a look at how typical ACH fees stack up to some other common forms of payment:

	ACH	Credit Card	Check
Flat Fee	$0.20-$1.50/transaction	$0.20-$0.30	Up to $4
Percentage Fee	0.5%-1.5%	1.5%-3.5%	N/A
Monthly Fee	$5-$30	N/A	N/A
Reversal Fee	$2-$25	$25-$50	N/A

As you can see, the cost of ACH is lower than credit card fees and check fees in many cases. Keep in mind that ACH processing fees may be listed as a percentage, a flat fee per transaction, or both. Whether a flat fee or a percentage will be better for your business depends on your typical transaction size but, in general, a flat fee will be better for many business types.

Don’t forget that many business bank accounts allow you to accept a certain number of unlimited ACH transactions with no processing fees. It may be better for your business to process ACH transactions through your bank, rather than through a merchant services provider or PSP. Again, it depends on your business. Knowing the fees associated with your bank and payment provider is the key to making the right decision for your business.

Now let’s look at these and other fees you may run into when you start accepting ACH payments:

Percentage Fee: If your ACH pricing includes a percentage fee on each transaction, you’ll be looking at a range of 0.5%-1.5%. That is significantly less than the range of credit card fees, which can go up to 3.5% or more.
Flat Fee: You may be charged a flat fee by your provider for each ACH transaction processed. These ACH processing fees can run from $0.20-$1.50/transaction. That’s higher than the flat fees you might pay on a credit card transaction. Keep in mind, however, that credit card processors typically charge both a percentage and a flat fee.
Setup & Monthly Fees: Traditional merchant services providers may charge around $15-$30/month to add ACH processing to your account. However, many providers will allow you to include ACH processing at no additional monthly cost. Again, it pays to be aware of the fees, so you can make the best choices.
Reversal Fee: When customers dispute an ACH payment and you’re faced with a reversal or chargeback, you could be looking at an additional fee. Keep in mind that ACH reversals are significantly less common than credit card reversals, and customers have less time and fewer reasons to challenge ACH transactions. ACH reversal fees range from $2-$25, depending on your payment processor.

Now that you’ve got a sense of ACH pricing basics, you might want to learn more about how they compare to typical credit card processing fees.

Finally, as you compare options and think about how to accept ACH payments, remember that it’s possible to find options, including business bank accounts and payment providers that charge no or low application fees, setup fees, or monthly fees. Some top processors for low-cost ACH include PaymentCloud, Square, and Helcim.

What Do You Need To Accept ACH Payments?

Setting up to accept ACH payments is really no more complicated than preparing to accept most other forms of payment from your customers. That doesn’t mean you won’t need to put in a little effort — but don’t worry, it won’t be too hard.

And, once you’re set-up, accepting ACH payments is almost entirely a hands-free operation. To get you started, let’s take a look at the information you’ll need and the steps you will take to set up one-time and recurring ACH payments from your customers.

Information Needed For ACH Transfers

Business Bank Account Information: You’ll need your business bank’s routing number and your checking or savings account number.
Customer Payment Information: To process an ACH payment, you’ll also need the payer’s bank routing number and checking or savings account number.
Virtual Terminal Or Web Form: To process payment for mail orders and telephone orders, you’ll need to key in payment information. For website payments, you’ll need a web form to collect information on your online store’s sales checkout page.
Payment Processor: If you’re taking ACH payments online, you’ll most likely want a payment gateway to transmit the data required for the ACH transaction.
ACH Authorization Form: If customers are paying in person or through the mail, rather than online, you’ll probably ask them to complete an ACH authorization form that includes the following: names and contact information for both the payer and the payee, payment details including amount and schedule (one time or recurring), a statement authorizing the form, and an explanation of how to cancel the agreement, including how much notice is required. Be sure to date this agreement, and add both the payer’s and the payee’s signature.

Do You Need Anything Else To Set Up ACH Payments?

The easiest way to set up ACH payments may be through your business bank account. In that case, you’ll simply share your bank information with your customer and ask them to initiate payment.

If you’re planning to use a third-party payment processor, you will need to pick a provider. The simplest option may be to add ACH as a payment option with your current provider, although you may want to research costs before you take this route.

If you’re starting from scratch, check out our comparison charts for merchant accounts or accounting software as a jumping-off point for your search!

How To Set Up & Accept ACH Payments

If you like what you’ve read about accepting ACH payments and want to get started saving money and see more secure customer payment methods, you’re in the right place.

Here are five things you can start doing today:

Step 1: Pick A Provider

If you’re already using a merchant service account or payment gateway provider, it makes sense to start your search there. If you’re just starting your quest to accept payments, we suggest you take a look at our list of the best payment processors that provide ACH and credit/debit card payment processing in a single package.

Be sure you understand the terms and conditions for using ACH payments with the payment provider you choose. You’ll want to be especially aware of application fees, account setup fees, and monthly fees that could affect your income. Look at the ACH payment processing fees, too, and make sure it’s a good one that compares favorably to credit card processing fees. If it seems high, keep looking.

Step 2: Set Up Your Account

If you already have a merchant account with a payment processor, this can be as easy as adding ACH as a payment option. Be aware that you may need to undergo a separate underwriting process, however, and you may need to pay additional fees to set up ACH payments.

If you’re planning to use a bank account to accept ACH payments, you will need to set up a business bank account, if you haven’t already. Once your bank account is active, you’ll simply provide customers with your bank’s routing number and your account number. Your customers will set up ACH payments, with no further work needed on your end.

Step 3: Tell Customers About ACH Payments

ACH payments are advantageous not only for the business accepting them but also for the customers who make them. Studies show that the costs of issuing a paper check for a business expense averages around $6 per check, including postage, supplies, and employee time devoted to the details.

It’s rare to find a business bank account or corporate credit card that does not offer free bill payment services. These services are a type of ACH transaction. So rather than spending time and money, and rather than exposing themselves to the risk of lost mail and identity theft, your customers can pay you safely, securely, and for free using ACH payments.

All you have to do is let them know how. We’ll share some suggestions for doing that in the next section below.

Step 4: Collect & Share Payment Information

If you want to use ACH payments to replace paper check payments, you’ll need to share your business bank account information with your customers and share your own with them. That information is required to initiate the ACH transfer of funds.

If you’re using ACH to replace credit card payments, particularly from online sales, you won’t need to share as much information. In fact, your customers should be able to enter their information on your online store, using a special web form, and initiate the ACH transaction on their own.

Step 5: Start Accepting ACH Payments

Once you’ve picked a payment provider and laid the groundwork there, letting your customers know you prefer ACH payments over paper checks and, in some circumstances, over credit card payments, you’re ready to start accepting ACH transactions.

To make sure your customers are aware of this payment option, you may need to highlight ACH payment details on your online store’s checkout page or on the invoices you send out via mail or email.

How To Get Your Customers To Pay By ACH

When it comes to thinking about how to set up ACH payments, the old saying about old dogs and new tricks definitely comes to mind. It may not be easy to get your customers to give up on credit card and paper check payments!

Although encouraging customers to move to ACH payments may take time and effort, it’s usually worth the effort. So here are some strategies that can help you along the way:

Invite New Customers To Use ACH Payments

Since it’s hard to change payment behaviors, it makes sense to start new customer relationships on the right foot. That means letting new customers know that ACH is your preferred payment method.

When you onboard new customers, you can’t force them to adopt ACH, but you can set that as an expectation, as long as you provide alternatives for any customers who resist.

Encourage All Customers To Pay By ACH

One thing’s for certain, your customers are not likely to approach you and ask to start paying their invoices with ACH transactions. When it comes to paying invoices in particular, most accounts payable departments operate in auto-pilot mode, and they often continue doing things the way they’ve always been done.

So the easiest and cheapest way to encourage them to adopt a new payment method could be simply to let them know that it’s available. Add a line to invoices, put a notice on your online store’s checkout page, have your customer service team mention it to customers — particularly those who often pay invoices after their due date. Let them know that setting up ACH payments can reduce their workload and simplify the process of paying the bills.

Educate Customers On The Benefits Of ACH Payments

ACH payments make sense for you, the seller. But they also make sense for your customers, particularly those who are used to paying you with paper checks or echecks.

As a recap, when customers use ACH, their payments are:

Less expensive
Labor-saving
Faster
More secure
Less susceptible to fraud
Easier to track

If you have a marketing team, you might want to ask for help crafting an ACH letter to “sell” customers on the idea of shifting to ACH payments. Don’t shy away from explaining how ACH transactions benefit your business, why ACH is your preferred payment method, and how your customers can benefit from ACH too.

Repeat The Invitation To Use ACH

Every good salesperson knows it’s not enough to ask just one time. When you want your customers to change behavior, you’ll need to ask many times, and in different ways, before you hear the Yes you’re hoping for.

So it’s not enough to add a payment option on your eCommerce checkout page or to add ACH payment information at the bottom of your invoices. Do those things, but be prepared to follow up to gain the results you want.

That could mean placing a phone call to some of your customers to make a personal pitch for using ACH. Ask your salespeople to explain and encourage ACH when they call on business customers and ask customer sales reps to do the same when those customers call in their orders.

Make sure to time your requests right. If you’re asking at the end of the month, when payments are already in process, you probably won’t succeed. Asking at the beginning of the month, or the beginning of the year, may yield better results.

Prioritize The Payments & Customers That Will Save You The Most

You’ve thrown out ACH payments as an option, and more than a few customers probably now are using ACH transactions. What about the rest? You don’t want to give up, but you also don’t want to waste too many resources chasing down customers who will never change.

Our suggestion: Look at your customer list and decide which you should target for special efforts to convert their accounts to ACH payments. It could be those customers who often pay late and require costly follow-up efforts — or those whose payments are large enough that reducing their payment processing fees could make a difference for you.

Maybe it’s those customers who place the same orders every month and have the same payment amount each time. Automating their orders and payments could save you both time and money, and ACH makes it easy to process recurring payments.

Incentivize Customers To Use ACH Payments

It shouldn’t be your go-to move. But if your customers firmly resist ACH payments, it may be worth offering them an incentive to make the switch.

Before you can offer a discount to customers who move from paper checks, credit cards, or debit cards, you’ll need to have a firm understanding of how ACH transactions affect your bottom line. Don’t give away more than you’ll realize in savings on payment processing fees.

Keep in mind, though, that ACH transactions can save you in more ways than just transaction fees. You can also avoid the cost of having to chase down late payments, and if your payment and accounting systems are integrated, ACH payments may be faster and less expensive to process.

An ACH discount can look different for every business, but it should be uniform for all customers or for those in similar tiers, such as B2B vs. B2C. A small discount, such as 5%, might be a good incentive, or you may see better results with a small one-time discount.

Because using ACH benefits customers too, you may be able to meet your ACH transaction goals with a one-time reward. Think outside the box and focus on what might motivate customers the most. It could be a charitable discount, a free gift, priority access, or something else. Don’t feel like you need to spend a lot on incentives; the key is finding the right motivation.

Learn From The Experts

If you’ve done everything you can think of and you’re still not seeing enough customers start to adopt ACH as their preferred payment method, it may be time to call for help.

You could pay a consultant to offer guidance. First, we suggest you take advantage of a free offer from Nacha, the organization that governs the ACH network. You can sign up for a free 15-minute consultation from Nacha, and use your time to discuss strategies for encouraging customers to pay via ACH transaction.

Is Accepting ACH Payments Right For Your Business?

By now, you’ve probably gotten a good sense of how ACH payments work and whether you should add ACH to your payments mix. If you’re still not certain if ACH transactions are right for your organization, we’ve broken it down for you here.

Key point: Even if you’re not sure that ACH payments are the best fit for your business, it may cost you nothing to add it as a payment option. And more payment options usually are better than fewer.

Add ACH Payments If …

You have customers with recurring orders
You sell subscriptions or memberships
You process B2B transactions
You have a majority of repeat customers who purchase regularly from you, even if their orders and transaction totals vary
You operate a high-risk business that currently cannot qualify to accept credit and debit card transactions
You are looking for an alternative to high credit card transaction fees
You want to encourage on-time payments, without having to chase them down

You May Not Benefit As Much From ACH Payments If …

Most of your sales are from one-time customers
The majority of your sales are face-to-face transactions
Overseas transactions are a significant portion of your sales
Instant revenue is enabled by your bank, eCommerce platform, or payment processor

Next Steps For Accepting ACH Payments

The benefits are clear. Once you understand how to set up ACH payments, your small business should grab the opportunity to make your customer payments safer, more secure, and less expensive to process.

Whether the majority of your business transactions occur online, over the phone, or through the mail, you can benefit from accepting ACH payments that electronically transfer funds from a customer’s checking account directly into your own account.

ACH transactions may become your preferred payment method, or simply a choice in a variety of payment options that include alternative payment methods like digital wallets, cryptocurrency, and more.

You’ll make more sales and find it easier to collect payment when you allow customers to choose the payment method that works best for them. That may include cash apps such as Zelle for Business. It’s worth taking the time to learn how to accept ACH payments, so you can give customers one more payment option and — hopefully — capture the sale.

Common Questions About Setting Up ACH Payments

Do all banks accept ACH payments?

Almost all US banks and credit unions are members of Nacha, the governing body of the Automated Clearing House (ACH) network, and can accept ACH payments. While it’s rare for banks outside the US to accept ACH payments, many other countries have their own automated payment networks, and Nacha coordinates with many of those.

What happens if an ACH transfer fails?

When an ACH transfer fails, it is known as an ACH return. You’ll probably be notified of the return within 2-4 days of the attempted transaction, and you’ll likely be charged a return fee from $2-$5. If a customer disputes a transaction and it is returned, you’ll be charged an additional fee.

Are ACH deposits available immediately?

ACH deposits are not available immediately. ACH transactions are batched and processed at several set times throughout the day. Once an ACH transaction is processed, you should see the funds in your account within 2-5 business days.

Do ACH payments process on weekends?

ACH payments do not process on weekends or on holidays; the ACH network is active only on business days. If you initiate an ACH transfer on a weekend or holiday, the bank will submit the request on Monday.

How much does it cost to send an ACH payment?

It’s usually free to send an ACH payment. For example, many banks offer online bill payment services at no charge. However, if you’re the one receiving an ACH payment, you may pay a percentage or a flat fee for each transaction.

How do I set up recurring ACH payments?

It’s easy to set up recurring ACH payment fees. You will need a recurring authorization form with information and signatures from both buyer and seller that includes bank account information, payment amount, payment frequency, and information about how to cancel the agreement. Once you provide this information to your ACH payment processor, your work is done.

Can Square accept ACH payments?

Square accepts ACH payments. You can enable ACH payments at no additional cost, including $0 setup and monthly fees. The per-transaction cost for ACH payments processed through Square is 1%, with a minimum fee of $1. Square charges $0 for rejected ACH transactions.

Can Canadian banks accept ACH payments?

The ACH network operated in the US is limited to transactions between US bank accounts. However, you can use International ACH Credits (IAT) to send money electronically to Canadian banks. You can also send money electronically to Canada and elsewhere in the world using a money transfer service.

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Kate Hoots

Expert Analyst & Reviewer at Merchant Maverick

An expert in business banking, consumer finance, and online payments, Kate Hoots has been writing about small business commerce since 2020. A former journalist for the West Linn Tidings and the Wilsonville Spokesman, Kate boasts wide experience in business leadership and communication. She has a degree in English Literature from Lewis & Clark College.

@KateHoots

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Sources

ACH Fees: The Costs Behind Check Processing (Accessed 08/30/2022) — Payment Cloud
Average Cost Of Credit Card Processing Fees (Accessed 08/30/2022) — Bankrate
How Much Does Is It Costing Your Business To Accept Paper Checks? (Accessed 08/30/2022) — Paystand

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How To Set Up ACH Payments For Your Business: The Step-By-Step Guide

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