How to Accept an ACH Payment for Your Business

The Automated Clearing House (ACH) network is an important part of the electronic financial transaction system in the United States. It facilitates electronic payments between bank accounts, offering a reliable and often more cost-effective alternative to paper checks and credit cards. Businesses use the ACH network for various payment needs, including collecting customer payments and managing vendor disbursements. This article guides businesses on establishing and managing ACH payment acceptance.

Understanding ACH Payment Mechanisms

ACH transactions fall into two primary categories: ACH Debits and ACH Credits. An ACH Debit pulls funds from a customer’s bank account, initiated by the business receiving payment. Conversely, an ACH Credit pushes funds from the business’s account to another, such as paying a vendor or issuing payroll. Businesses choose the mechanism that aligns with their financial operations.

Businesses commonly use ACH Debits for recurring payments. Direct Debits are common for subscriptions or memberships, often using Standard Entry Class (SEC) codes like PPD for consumer accounts or CCD for corporate transactions. Other mechanisms include Web-Initiated (WEB) entries for online authorizations and Telephone-Initiated (TEL) entries for phone authorizations. Understanding these SEC codes helps ensure compliance and accurate processing.

Setting Up Your Business for ACH Acceptance

Before accepting ACH payments, a business must partner with an ACH processor or financial institution. This partner, often a bank or third-party payment gateway, provides access to the ACH network.

Selecting an ACH processor involves evaluating several factors. Fees and pricing models are a significant consideration, with typical transaction fees ranging from $0.20 to $1.50 per transaction, or 0.5% to 1.5% of the amount. Some processors may also charge monthly fees ($5-$30) or small batch processing fees (under $1.00). Integration options with existing accounting software or e-commerce platforms are important for streamlining workflows. Businesses should also assess the processor’s customer support, reliability, and adherence to security measures and NACHA rules.

Applying for an ACH merchant account requires submitting business documents. These typically include the Employer Identification Number (EIN), business registration documents, and recent bank statements. The processor conducts an underwriting review, which may involve a credit check, to assess risk. Approval timelines vary, but once approved, the business can set up its ACH acceptance capabilities.

Gathering Customer Information for ACH

Each ACH transaction requires specific customer information. Essential data points include the customer’s bank account number, their bank’s routing number, the full name of the account holder, and the account type (checking or savings).

Obtaining verifiable authorization from the customer is important for every ACH debit. NACHA rules mandate that businesses secure clear consent before initiating any debits. This authorization confirms the customer agrees to the payment terms and allows the business to pull funds from their account.

Authorization can be obtained through several methods. Written authorization, such as a signed agreement, typically details the payment amount, frequency, and account information. Electronic authorization often occurs via web forms with explicit consent checkboxes, digital signatures, or “I agree” statements. For telephone-initiated payments, verbal authorization is permissible but requires recording and confirmation of consent. Businesses must securely store all authorization records for at least two years following termination or revocation, providing proof for compliance and dispute resolution.

Initiating and Managing ACH Payments

Once ACH acceptance is set up and customer information and authorization gathered, the next step is to initiate the payment request. This process typically occurs through the chosen processor’s online merchant portal, an integrated API, or specialized software. The business inputs the collected bank details, payment amount, and transaction type, then confirms submission.

The ACH network processes transactions in batches. After submission, these batched payments are transmitted through the NACHA network. Funds are typically debited from the customer’s account and credited to the business’s account within one to three business days for standard ACH transactions. Same-day ACH options are available for an additional fee, offering faster processing, usually within hours on the same business day.

Businesses should monitor the status of submitted payments within their processor’s system. Transactions may result in returns or exceptions. Common reasons include insufficient funds (NSF), invalid account numbers, or unauthorized transactions.

When a return occurs, the processor notifies the business, often with a return code indicating the reason. Businesses then take appropriate steps, such as re-submitting the payment if correctable, contacting the customer for updated information, or adjusting records. Most returns are processed within two business days, though unauthorized claims by consumers can have a longer return window, up to 60 days. Maintaining a low return rate is important, as high rates can lead to fees or restrictions on using the ACH network.