What Is An ACH Payment & How Does It Work?

ACH payments are electronic transactions that shift money from one bank account to another. So, are ACH transactions safe and reliable?

In this post, we’ll explore all things ACH to help you decide if your small business should accept ACH payments.

For specific vendor recommendations that offer ACH processing, check out our article on the best ACH payment processors for small businesses.

What Is An ACH Payment?

ACH payments are automated digital payments. For most businesses, ACH is generally cost-effective and reliable.

ACH payments use a wireless network called the Automated Clearing House to transfer funds from one bank account to another. They are available at almost all US-based bank and credit union accounts.

Who Can Use ACH Transfers?

Any business with a bank account within the Automated Clearing House network can use ACH transactions to make it easier for customers to pay. You can use ACH in many aspects of your business, including banking and loan payments, to simplify your finance tracking.

Here are some specific suggestions for smart ways to put ACH to work for your business:

• Bill Payment: ACH payments are particularly well suited to utility bills, medical expenses, and tuition payments.
• Payroll Services: Using ACH in accounting to manage payroll via direct deposit is one of the easiest ways to simplify your business bookkeeping.
• Tax Payments: Individual taxpayers who make electronic tax payments are using ACH payment processing. In business, you can use ACH in accounting to help you make state and federal tax payments easily — and on time.
• Loan Payments: ACH payments are one of the easiest ways to handle business loan repayment.
• Memberships & Subscriptions: From software to professional organizations and everything in between, you can probably set up ACH transactions to ensure payment is made on time, with no lapses or interruptions.
• Rent Payments: Whether you’re the tenant or the property owner/manager, ACH payments are a simple and easy way to pay the rent. You can set up automatic payments, so you don’t have to think about the rent/mortgage each month.
• Recurring Services: Freelancers, coaches, therapists, and contractors don’t have time to track down payments. If you let your clients know they can pay quickly via ACH, they may be more inclined to do so.
• Donations: Most of the information in this article relates to sales, but nonprofits can also use ACH payments. If you rely on one-time or recurring donations, invite your patrons to send funds via ACH instead of a check or credit card.
• Merchant Accounts: You probably already have a merchant account set up that allows you to accept credit cards, debit cards, and other forms of payment. Check with your processor to see if you can include ACH payment processing services under your existing account.
• B2B Payments: Just as you should encourage your customers to pay invoices via ACH transfers, you should consider setting up ACH payments for your business bills.
• eCommerce: Your customers are used to paying online with a credit card or a service like PayPal. Steering them toward ACH payments can save you a lot of money in credit card processing fees.
• Account Transfers: You can also use ACH payments to move funds from one bank to another.

How Does ACH Work?

ACH transfers take slightly different forms, depending on whether they are ACH debits or ACH credits. However, in both cases, the process is almost completely automated once it’s initiated. ACH transactions can be mostly hands-off and easy to manage.

Let’s look at the steps involved in any ACH transfers:

How Long Do ACH Payments Take & When Do ACH Payments Post?

With any electronic payment, you can expect a lag time between when the customer pays and when the money is available for you to access. Here are answers to some common questions about ACH payment timing:

Do ACH Payments Post On Weekends?

Nacha requires banks to process ACH payments within one business day of receiving payment requests. Note the key phrase “business day.” This tells you that ACH payments won’t be processed on days banks typically are closed, such as weekends and holidays.

What Are ACH Batch Times?

Banks hold ACH payment requests as they come in and then process them in batches. Batch processing times can change, but are set by Nacha consistently across all banks.

All ACH batch processing is set to Eastern time, so if you’re in a different time zone, your late-day transactions may not process until the next business day.

Do Banks Hold ACH Payments?

When your bank receives funds from an ACH payment, it may hold the money for a short time before making it available. Typically, this hold time will be no more than one or two days, with most ACH payments processed by the next business day.

ACH payments do not post on weekends or holidays when banks are closed.

Is Same-Day ACH Processing Available?

If you just can’t wait for standard processing times, Nacha enables same-day ACH processing for most types of ACH payments. However, not all US banks and credit unions participate in the same-day program, and there’s no support for international transactions.

If you want to access same-day ACH processing, your expedited transactions may be subject to additional fees. Nacha also imposes a $1 million-per-transaction limit on same-day ACH processing. Your business bank may impose limits on ACH transactions by day, week, or month. Check with your bank for details.

The Bottom Line On ACH Payments

ACH payments are safe, reliable, convenient, and reasonably fast. Whether you’re aware of it or not, you’re probably already using ACH in your business, whether for payroll, recurring bills, rent, or subscription fees.

If you’re not encouraging your customers to utilize ACH payments, you’re missing an opportunity to save money and receive payment not only more quickly, but also more reliably. If your business model relies on subscriptions or any other kind of recurring payment, that’s especially true for you.

Ready to get started with ACH payments? Check out our complete guide to learn how to accept ACH payments so you and your customers can start setting up and benefiting from this payment method.

ACH Payment FAQs