How to accept ACH payments as a business

Accepting ACH payments is a smart, cost-effective way to collect client payments. The Automated Clearing House (ACH) network allows you to securely receive payments electronically without the hassle of paper checks or paying credit card processing fees.

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In this guide, we'll walk you through how to prepare your business to accept ACH payments. Don't worry—it’s easy to get started, even as a small business.

What is an ACH payment?

An ACH payment is an electronic funds transfer between banks facilitated by the Automated Clearing House network. Unlike bank transfers or credit card payments, banks process ACH payments in batches, making them more cost-efficient than other electronic payment methods.

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ACH payments have emerged as a popular and secure solution, especially for online payments. Major players like QVC, Walmart, Amazon, Wayfair, and eBay all accept ACH payments at checkout as an alternative to credit or debit card payments.

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You've probably encountered ACH payments without realizing it, whether you used direct deposit for payroll or set up automatic bill pay.

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How do ACH payments work?

ACH payments work by moving money electronically between banks. Here’s the typical process:

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1. A customer initiates a payment by giving instructions to their bank
2. The bank submits a digital payment file to the ACH network
3. The network passes the digital payment files on to the receiving bank
4. The receiving bank adds money to your business bank account

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National Automated Clearing House Association (Nacha), the regulatory body that oversees the ACH network, estimates it settles 80% of ACH transactions within one banking day. The rest are almost always completed within three business days.

How do you accept an ACH payment?

Accepting ACH payments for your business is simple. Here are the steps involved:

1. Set up your business bank account

First, you need a business bank account with a financial institution that supports ACH transactions. Most banks and financial institutions offer this service, but it's a good idea to confirm the details.

2. Choose a payment processor

Next, choose a payment processor or accounting software that allows you to set up ACH payments. Popular options like QuickBooks, Square, and Stripe offer easy ACH integration. Be sure to review each processor's fees, range of services, and security protocols before picking one for your business.

3. Establish a merchant account

After deciding on an ACH payment processing solution, the next step is to create a merchant account. This will give your business access to the ACH network and let you request payment from customers.

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To open a merchant account, you’ll need to provide:

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• Your business name
• Your business address
• Your personal ID
• Business documents (business license, operating agreement, etc.)
• Federal tax ID number
• An estimate of your regular transaction volume

4. Collect customer details and authorization

Once you have your account in place, you’ll need to send your customer an ACH authorization form and collect their bank account details, including:

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• Your customer’s name
• The name of their bank
• Your customer’s bank account number
• Their routing number

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Alternatively, you could send them an ACH debitrequest via your chosen platform.

5. Integrate ACH payments into your payment system

At this point, you’re ready to embed ACH payment methods into your current payment framework. How this integration unfolds depends on the nature of your transactions, whether they occur online, face-to-face, or via invoice. Once your customer initiates payment, the funds will be transferred directly into your business account—usually within one to three days.

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What are the business benefits of accepting ACH payments?

Accepting ACH payments offers several benefits:

ACH payments are cost-effective

ACH transaction fees are significantly lower than many alternatives. According to the Association for Financial Professionals’ 2022 Payments Cost Benchmarking Study, the median cost of initiating and receiving an ACH payment is between 26 and 50 cents.

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Compare that to the following average costs:

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• Paper checks: $1.01 to $2, including internal labor costs for processing
• Wire transfers: A flat fee of $0 to $15 domestic or $0 to $30 international
• Credit card transactions: 1.5% to 3.5% of the total transaction

ACH payments are secure

ACH payments are much more secure than paper checks, which can be lost or stolen. Well-regulated institutions handle digital ACH payments, so they’re as safe as any digital transaction at your bank.

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Plus, unlike wire transfers, you may be able to reverse an ACH payment under certain circumstances. This means you're less likely to lose money if you make a mistake.

ACH payments are fast and reliable

As mentioned above, banks typically settle ACH transactions in one to three business days. You can also set up recurring ACH transfers, making it easy to collect recurring payments for a subscription-based business or ongoing services.

ACH payments are efficient

Since ACH payments are digital, there's no need to manually process paper checks, swipe debit or credit cards, or visit the bank. This digital aspect of ACH transfers saves you time.

ACH payment alternatives

If ACH payments aren't the right fit for your business or clients, you have a number of other payment options to choose from depending on your business needs. Here are a few alternatives to consider:

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• Credit cards provide instant processing, although they come with higher fees
• Wire transfers might be a better fit if your business deals with very large transactions or international clients
• A third-party payment processor like PayPal or Venmo is easy and convenient for customers, but they often charge processing fees similar to credit cards
• Paper checks are slow and expensive to process, but they're still in use—particularly among adults over the age of 55

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Each method has pros and cons, so the best choice depends on your business model, transaction volume, and customer preferences. Offering customers a variety of payment options provides flexibility and supports cash flow to keep your business running.

Integrate ACH payments into your AP process with Ramp

In addition to being a great payment option for your customers, ACH transfers offer an efficient way to pay your own bills. Ramp’s modern finance platform offers flexible payment options and AP automation features to transform the way you pay your vendors:

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• Time-saving automation: Ramp’s AP automation software can help you save an average of 10 minutes per invoice by digitizing your approval workflows and automating document matching
• Efficient vendor setup: Our platform addresses common issues like incorrect bank information from vendors. Ramp provides a centralized system for vendor onboarding and bank account verification, minimizing errors and payment rejections.
• No processing fees: Ramp doesn’t charge any processing fees for domestic bill payments, helping your business save money on transaction costs
• Versatile payment options: Choose between ACH, same-day ACH, credit card, check, or wire transfer. Ramp gives you unmatched flexibility to manage different types of vendor payments.

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Watch our demo video to learn more about how Ramp’s expense management, corporate cards, and AP automation features save customers an average of 5% a year.