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5 Ways Your Company Can Benefit by Using ACH Electronic Funds Transfers

Lower costs, streamlined operations and greater flexibility and convenience – these are just some of the way ACH electronic payments can help your business.

Businesses across a wide range of industries are increasingly making and receiving payments electronically using Automated Clearing House (ACH), also known as e-checks or electronic funds transfers (EFT). According to NACHA, the Electronic Payments Association, 2018 was the biggest year yet for sheer volume of ACH payments – there were nearly 23 billion transactions totaling $51.2 trillion in value that year. This article examines the types of ACH payments and the business advantages of using them.

 

3 types of ACH payments

  1. Direct deposit. Many businesses no longer issue paper payroll checks to their employees; instead they pay them electronically with direct deposit. The government also uses direct deposit to make Social Security and other benefit payments to recipients and to issue tax refunds.
  2. Electronic debits and credits. These are B2B payments to vendors and suppliers and B2C payments by consumers of recurring bills like their mortgage, insurance premiums, utility bills and club membership dues. 
  3. Tax payments. Federal, state and local government entities enable businesses to pay taxes electronically via ACH, including Electronic Data Interchange (EDI) payment detail, instead of mailing in paper payments. 

 

According to Katrina King, Executive Vice President and Treasury Management Executive for Cadence Bank, the main alternatives to ACH for making and receiving payments are paper checks, credit/debit cards and wire transfers. “ACH offers a number of benefits when compared to these options,” she says. These include:

 

1. Improved cash flow

As a recipient of ACH payments, you’ll no longer hear, “The check is in the mail.” You are assured of receiving funds on the due date and no later. And as a payer, you can hold onto your funds right up until the payment due date. Either way, you enjoy stronger and more predictable cash flow.

 

Same-day ACH Originations allow you the ability to expedite payments or collections requiring same-day receipt for single transactions $100,000 or less at a fraction of the cost of a domestic wire transfer. Same-day ACH also provides you with a contingency option for emergency payrolls and missed payment deadlines.

 

2. Lower costs

Whether you’re receiving or disbursing payments, doing so via paper checks is expensive. Studies show it costs an average of $1.22 to process a paper check received for payment, while the same payment can be processed for pennies using ACH. And disbursing payments using checks involves myriad costs — such as check printing, envelopes and postage — that disappear when using ACH. All the invoice posting details can accompany the ACH payment electronically with EDI data.

 

Wire transfers, meanwhile, can cost $20 or more to send. Unless a payment needs to be made immediately, ACH will always be a more cost-effective electronic funds transfer option than a wire transfer.

 

3. Greater flexibility and convenience

Scheduling debits and credits to be made automatically via ACH is more convenient than writing, mailing, receiving and processing paper checks. Also, check approvers don’t have to be tied down to the office to sign checks — they can approve ACH payments securely online from anywhere. And most employees love the convenience of payroll direct deposit, since they no longer have to go to the bank on payday to cash or deposit paychecks. 

 

4. Reduced fraud opportunities

Using ACH also makes it harder for employees to commit payment fraud, especially check fraud. To maximize security in this area, Cadence Bank suggests:

  • Always use dual controls when setting up vendors for ACH payments. Otherwise, a dishonest employee could use alternate bank account numbers to make ACH payments to a fraudulent account or via direct payment.
  • Restrict employees’ access to change ACH template record details to further safeguard your company’s payment detail.
  • Ensure that your accounting or payroll platform is locked down, secured and has internal multi-authentication in place to help avoid a cybersecurity breach.

Fraudsters are increasingly targeting middle-market companies that generally do not have the same levels of security as large corporations. Download our ebook, How to Minimize the Risks of Fraud, to learn more fraud prevention tips.

 

5. More environmentally friendly

ACH is a green alternative to writing and processing thousands of paper checks. Not only do you save trees by eliminating paper use, but the need to transport checks via truck is eliminated as well.

If your company is not realizing benefits like these by making and receiving ACH payments, what are you waiting for? Contact Cadence Bank to learn more about these and other benefits and how to get started with ACH.

Read also: How Your Company Can Benefit from Business Process Improvement

 

 

This article is provided as a free service to you and is for general informational purposes only. Cadence Bank makes no representations or warranties as to the accuracy, completeness or timeliness of the content in the article. The article is not intended to provide legal, accounting or tax advice and should not be relied upon for such purposes.

 



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