For small businesses, having an efficient process to send and receive payments is mission-critical. While most SMBs view digital consumer transactions as a given, billions of dollars of business-to-business, or B2B, payments are still issued with paper checks. With the coronavirus pandemic outbreak, small businesses recognize the need to diversify their payment methods and find solutions that facilitate “hands-free” B2B payments to keep the wheels of business turning.
What is an ACH payment?
ACH payments or ACH transfers are electronic bank-to-bank money transfers processed through the Automated Clearing House Network. ACH payments allow entities to securely send and receive electronic payments even if they are at different banks. Types of ACH transfers include person-to-person payments (like Venmo), business bill payments, direct deposits from employers to employees, and government benefit programs.
Signing up to send or receive ACH payments requires both sides to connect their bank to the ACH network and give permission to deduct or credit their account. For this reason, many small businesses are still hesitant to adopt ACH as a form of payment to their vendors. However, checks and ACH use the same financial information to process payments (routing number, account number, and payment number). Any time a small business sends a paper check, the data on it can potentially be exposed to whoever comes in contact with it.
On the other hand, the ACH network has security protocols set up to allow businesses to join the network and transfer money between them without seeing each other’s bank details and protecting data.
Here are 6 benefits of ACH payments for your small business:
- Control of your cash flow
Because an ACH lets you schedule payment dates, your small business can make payments for their due date, allowing you to hold on to your cash longer. This helps eliminate the uncertainty of when a check will be deposited, funds withdrawn, not to mention the extra time, cost, and penalties if a check gets delayed or lost in the mail.
When you receive a business payment via ACH, you don’t have to wonder when payment will arrive because the funds are forwarded directly from your customer’s bank account.
- Save time and money
Even though many banks offer small businesses free checks with their accounts, paying with a check still comes at a price. Bank of America found that a small business can pay between $4 to $20 per check when you factor in writing a check, mailing, stamps, collecting and reconciling the check.
On the other hand, paying business bills with an ACH is more cost-effective. If you use a solution like Melio to send and receive business-to-business payments, the whole process is entirely free and processed with just a few clicks.
ACH payments minimize the risk of a payment being forged, lost, or stolen. ACH transactions are encrypted, and the platform stores the data without exposing it to accounts or vendors. Protecting your data should always be a priority, and ACH payments are designed to do just that.
- Hands-free payments
ACH transfers are an ideal solution for the current business environment where COVID-19 has disrupted many existing infrastructures. The fact that small businesses and their vendors and suppliers can use an online automated system and continue to process payments between them is vital to keeping businesses running.
- Ideal For Recurring Payments
If you need to make recurring payments (e.g., rent or lease), ACH payments can save you the time spent on routine transactions and process those payments on time without repeated reminders. ACH payments also allow you to receive recurring payments on time, enabling you to better manage and predict your cash flow.
- Going Green
ACH payments are electronic transactions and eliminate the need for the paper required to print checks, envelopes, stamps, and of course, the carbon footprint required to transport and deliver checks.
We are (still) living a paper check world
Despite the advantages of ACH payments, many small businesses are committed to vendors and suppliers who require payment in checks. Rent, utilities, insurance, and other business expenses seem to still gravitate towards paper.
Fortunately, smart and free online solutions like Melio can help small businesses manage payments efficiently and provide freedom from how their vendors want to get paid. With Melio, small businesses can pay their business bills online with an ACH for free. Melio then delivers the funds to the recipient via a paper check or ACH, also for free, effectively liberating each side from the other’s payment preferences.
Since many small businesses are vendors themselves, Melio also provides a simple and free pay link so your business customers can pay you with an ACH without ever having to reveal your business’ bank details.
We hope you’ve enjoyed this overview of the benefits of ACH payments. If you want to move your small business payments to the digital space but thought it was complicated or would not be able to work with your vendor online, we would be happy to show you how easy it is to get set up. Just follow the link to get started for free.