How to make ACH payments: A step-by-step guide

For businesses paying employees, vendors, or service providers, ACH payments streamline transactions, reduce costs, and eliminate the hassle of traditional payment methods. As a form of electronic payment, ACH transfers offer a secure way to send money and manage everything from bill payments to refunds.

In this post, we'll cover how ACH payments work, types of payments, typical costs, and everything you need to know about how to do an ACH transfer as a business.

How do ACH payments work?

ACH payments move money electronically between U.S. bank accounts through the Automated Clearing House network, which is administered by the regulatory body Nacha.

When you initiate a payment, your bank (the originating institution) sends the transaction details to the ACH network. The network processes the payment and routes it to the recipient's bank (the receiving institution), which then credits their account.

The sender provides authorization and payment details, while the recipient simply needs to share their bank account information. Both banks manage the transfer by communicating with the ACH network, which acts as the secure middleman.

The ACH network operates under strict security standards and regulations, including encryption and fraud monitoring systems. Payments typically process in batches rather than individually, which helps keep fees low while maintaining reliability.

ACH payments create a seamless electronic bridge between bank accounts, allowing money to flow safely and efficiently through established banking infrastructure.

ACH payment types

ACH payments come in two main forms: ACH debits and ACH credits. Here’s how they work:

• ACH debit: Pulls funds from an account, making it ideal for recurring payments such as monthly bills or subscription services
• ACH credit: Pushes funds to another account, often used for paying vendors, suppliers, or employees via direct deposit or other automated methods

Knowing the difference between these types of ACH payments helps you manage cash flow more effectively. For example, ACH debits let you pay bills automatically, avoiding late fees, while ACH credits let you control payment timing to align with incoming revenue.

Within those two categories are two more specific types of ACH payments: ACH direct deposit and ACH direct payment. Here's how they're used:

• ACH direct deposit: Electronic payments that flow into your bank account, commonly used by employers for payroll, government agencies for tax refunds and Social Security benefits, and companies sending retirees' benefit payments
• ACH direct payment: Electronic payments that flow out of your bank account to pay bills, vendors, or make purchases, including automatic utility and mortgage payments, business-to-business vendor payments, online purchases, and peer-to-peer transfers through banking apps

ACH payments offer flexible options for both incoming and outgoing transfers, giving you control over when and how money moves through your business accounts.

How to make an ACH payment in 5 easy steps

Setting up ACH payments is simple when you break down the process into actionable steps. Here's how to get started:

Step 1: Gather the necessary information

Before initiating an ACH payment, make sure you have all the details you need:

• Your business’s bank details: Account number, routing number, and account name, all of which you can find on your bank statement
• Recipient’s bank account information: The payee’s account number, routing number, and account name
• Payment specifics: Include the amount, payment date, and any memo for reference
• Written authorization: An ACH authorization form allows you to process the payment and helps maintain compliance with Nacha rules

Having these details on hand prevents errors and keeps transfers flowing seamlessly.

Step 2: Choose an ACH provider

Your ACH provider acts as the middleman, handling transactions securely and efficiently. The right provider makes a big difference when it comes to flexible payment options.

Here’s what to look for when choosing an ACH provider:

• Nacha compliance: Choose providers that meet standard Nacha operating rules
• Transparent fees: Know what each transaction costs up front
• ERP compatibility: Confirm that the system integrates with your accounting software for seamless management
• User-friendly tools: Modern interfaces and helpful customer support make managing payments easier

A provider that checks these boxes will make your ACH processing more efficient and help protect your business.

Step 3: Set up ACH payments in your system

The next step is to integrate the necessary payment details into your business’s financial systems. Be sure to:

• Integrate banking information: Enter your business’s account information into your ACH provider’s platform or ERP system
• Add vendor details: Double-check the accuracy of recipient data to avoid failed transactions
• Verify permissions: Make sure you have proper authorization to process payments, protecting your business from compliance issues

Proper setup minimizes errors and keeps everything running smoothly.

Step 4: Authorize and submit the payment

With your system set up, paying vendors via ACH is straightforward. Here’s how to do it:

1. Select the payment type: Decide between single, batch, or recurring payments
2. Enter and review payment details: Double-check the recipient’s account information, payment amount, and memo or reference details
3. Authorize the transaction: Approve the payment with your credentials, such as multi-factor authentication or a digital signature

If you’re unsure which payment type to use, here’s how they differ:

• Single payments: Best for one-time transfers, such as paying a vendor or contractor
• Batch payments: Useful for processing multiple payments at once, saving time on vendor invoices or paychecks through payroll
• Recurring payments: Automate ongoing expenses, such as rent or subscriptions, to reduce manual effort

Whether you're processing a single transfer or automating recurring bill payments, ACH transactions are ideal for secure, efficient online payments.

Step 5: Monitor and reconcile payments

ACH transfers typically take 1–3 business days to complete. When they process, monitor and reconcile your ACH payments to maintain accuracy and keep your financial records in order. You can do this by:

• Tracking records: Keep a log of transactions, including dates, amounts, and recipient details
• Reviewing bank statements: Regularly check statements to confirm completed payments and catch discrepancies
• Reconciling invoices: Match outgoing payments to invoices to verify that everything aligns

If you encounter an ACH payment issue, contact your bank immediately to report the problem and request assistance with reversing or correcting the transaction. Document all details of the issue and maintain records of your communication with the bank for follow-up and resolution tracking.

With consistent monitoring, your business will remain organized and avoid costly mistakes.

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ACH payment costs and processing times

Banks usually charge fees for ACH transactions. Typically, standard ACH payments cost $0.20–$1.50, while same-day ACH payments can cost anywhere from $1–$5 per transaction. ACH payments are usually much less expensive than wire transfers and paper checks, which can cost $15–$50 or $1–$3, respectively.

Standard ACH payments usually process in 1–3 business days, but it's important to remember that bank cutoff times, weekends, and holidays can impact timing. Next- and same-day ACH payments are subject to the same factors.

Standard ACH payments are slower than wire transfers but faster and more secure than checks, making them an attractive and cost-effective payment option.

Considerations when using ACH payments

ACH payments simplify business finances, but a few key factors can influence how and when transactions are processed. Here’s what you should know:

• Cutoff times: Submitting payments after the daily deadline means they’ll process the next business day
• Sufficient funds: Make sure your account balance can cover the transaction to avoid failed payments and potential fees
• Transaction limits: Some banks or ACH providers set caps on how much you can send in a single payment or per day

By planning ahead and staying within these guidelines, your business can keep payments running smoothly without interruptions.

Best practices and common mistakes to avoid

Getting ACH payments right saves time and prevents headaches down the road. Follow these proven strategies to optimize your payment process:

• Verify account details twice: Double-check routing and account numbers before submitting payments to prevent costly returns and delays
• Set up payment schedules: Establish consistent timing for recurring payments to improve cash flow management and reduce manual processing
• Keep detailed records: Maintain comprehensive transaction logs with dates, amounts, and recipient information for audit trails and dispute resolution
• Use descriptive payment references: Include clear, specific descriptions that help both you and recipients identify transactions easily
• Monitor account balances: Check available funds before initiating payments to avoid overdraft fees and failed transactions

Watch out for these frequent missteps that can derail your ACH payment process:

• Rushing through setup: Skipping verification steps can lead to failed payments, returned funds, and frustrated recipients
• Ignoring cut-off times: Missing bank processing deadlines pushes payments to the next business day, affecting timing expectations
• Using outdated account information: Sending payments to closed or changed accounts creates unnecessary complications and delays
• Forgetting about holidays: Banking holidays affect processing schedules, so plan payments around federal and bank-specific closures
• Mixing up payment types: Choosing the wrong transaction types can cause rejections and require reprocessing

These practices help you avoid expensive mistakes while building reliable payment workflows that benefit everyone involved.

Benefits of ACH payments for businesses

ACH payments don’t just streamline transactions; they transform how your business handles its finances. By leveraging them, you gain advantages that go beyond simple convenience, such as:

• Cost savings: ACH transfers are less expensive than wire transfers, ePayables, or paper checks
• Efficiency: Automating payments reduces manual work and accelerates processes
• Security: Built-in encryption and Nacha compliance protect against fraud
• Integration: ACH systems can connect with your ERP or accounting software, simplifying payment workflows

Automate your ACH payments with Ramp

No matter which payment processor or method you choose, Ramp’s modern finance platform can help improve your payment processing workflows. From checks and card payments to same-day ACH and international wires, our AP automation software lets you manage all your payments from a single dashboard.

Ramp Bill Pay uses AI to automate your entire accounts payable workflow, from processing invoices to scheduling payments. With all your payment data in a unified dashboard, you can quickly find any invoice, analyze monthly spend, and find opportunities to optimize cash flow.

Ready to learn more? Watch our demo video to see why Ramp customers save an average of 5% a year across all spending.

This post includes general information about ACH payments. For help with ACH functionality specific to Ramp, visit Ramp Support for more details.