Small business owners have a lot to take care of and that is having a smooth business transaction. It is essential to be able to send and receive money smoothly so that it does not interfere with the overall business process. While B2C transactions have been digitized to a great extent. Most B2B transactions still follow the traditional payment methods, like checks. With the outbreak of the new coronavirus, small businesses have started understanding the importance of digital payment and hence the popularity of the ACH system is on a rise. Diversifying the payment method will make them independent and will also keep the business running.
Before we start discussing the benefits of using ACH for small business, it is essential to understand what is ACH processing and how does it work. ACH transfers can be described as a money transfer from one bank to another through the automated clearing house network. The system allows entities to send and receive payments in a secured way, through an electronic network, even if both parties have accounts in separate banks. Apart from person-to-person payment, you can also do business bill payments, direct deposits, salary transfers, and government tax payments through this system.
To send or receive ACH payments, both parties need to add their bank to the ACH network. They also need to permit the account to debit or credit money. Because of the process, many small businesses are still hesitant to adopt ACH payment as a form to pay their suppliers. However, it is to be noted that checks and ACH, both use the same information to process payments. On the contrary, sending paper checks increases the risk of exposing data to fraudsters. ACH has a security protocol set up which allows businesses to join networks and transfer money between them without exposing any details. It helps in protecting the data.
The benefits of using ACH for small businesses:
- It helps in controlling your cash flow.
The ACH lets you schedule your payment date. Your business will be able to make payments on due dates, which will allow you to hold onto the cash for longer. It helps to eliminate uncertainty about check deposition, and fund withdrawal. It helps you to eliminate the wastage of any extra time in case the check gets lost due to some reason. Using the ACH payment, you will not have to worry about when the payment will arrive. The money is directly transferred from the payer to your bank account.
- The system helps to save a lot of time and money. One may argue that checks sometimes come free with the bank account, but making payment through checks still comes at a price. A small business pays around $4 – $20 for each check which involves factors like writing the checks, mailing it, stamps, collecting, and reconciliation of the check. However, paying business bills through the ACH system is more cost-effective. The whole process is free and the transfer is done through a few clicks.
- ACH transfers are indeed very secure. It minimizes the risk of forged, lost, or stolen payments. These transactions are encrypted, and the account would store data without revealing the information to the vendors. ACH payments are designed to protect your vital banking information.
- Automatic and continuous payments.
With the onset of the COVID situations, work has become remote, and people now do not meet that often. It has disrupted many existing infrastructures, and hence online payments can be a boon in this period. The automated system will continue to process payments without interruptions; this will help keep your business running.
- The ACH transfer is the best way to make recurring payments.
You will no longer have to remember about lease and rents, and payments will be processed automatically. You will no longer need repeated reminders which will save a lot of time. It helps in managing and predicting your cash flow in a better way.
- With ACH payments, you would not need to handle a lot of papers.
Everything is done electronically over the network. The process can help to reduce your carbon footprint and you will be able to contribute towards a greener world.