How to Request ACH Payment From a Customer

Understanding ACH Payments

The Automated Clearing House (ACH) network is an electronic funds transfer system for moving money between U.S. bank accounts. It facilitates paperless payments, unlike card networks, wire transfers, or physical checks. Businesses often opt for ACH payments due to cost-effectiveness, incurring lower transaction fees than credit cards. Predictable for recurring payments like subscriptions or direct deposits, ACH provides consistent cash flow. It also offers enhanced security and improved operational efficiency.

Gathering Customer Information and Authorization

Initiating an ACH payment requires specific customer details: full name as it appears on the bank account, bank account number, bank routing number, and account type (checking or savings). Accurate collection is fundamental for successful processing.

Proper customer authorization is foundational before any ACH debit. This legally binding agreement confirms consent to debit their account and ensures Nacha compliance. It protects your business and the customer from unauthorized transactions and disputes.

Authorization can be secured through various methods. Written authorization, such as a signed form, is common. A standard form must clearly state payment terms (amount, frequency, effective date), business and customer details, a clear authorization statement, and revocation instructions.

Electronic authorization methods are convenient, typically involving online forms where customers consent via checkboxes or digital signatures. Identity verification often involves inputting account details or micro-deposits.

Verbal authorization is permissible but carries strict compliance requirements. The conversation must be recorded, and clear transaction terms communicated. The customer must initiate the call, and your business must disclose transaction details (amount, recurring payment frequency, and revocation instructions). Nacha rules require retaining proof of authorization records for a minimum of two years following the last transaction or agreement end.

Selecting and Setting Up Your ACH Payment System

Processing ACH payments involves choosing a suitable system or provider. Businesses typically use commercial banks or third-party ACH payment processors. Larger businesses may integrate directly with their bank; smaller businesses often benefit from third-party services that simplify ACH network complexities.

When selecting a provider, consider several factors. Fee structure is significant, varying by per-transaction, monthly, and potential setup or hidden fees. Evaluate integration capabilities to ensure seamless connection with existing accounting or invoicing systems.

Security measures and Nacha compliance are paramount for protecting sensitive financial data. Look for providers with robust security features like data encryption, multi-factor authentication, and fraud prevention tools. Customer support and platform ease of use are important for effective payment management. Comprehensive reporting and reconciliation features track transactions and maintain accurate financial records. Setting up an account typically involves an application, verification, and linking your business bank accounts.

Initiating and Managing ACH Payment Requests

With customer information, authorization, and an ACH system, initiate and manage payment requests. Submit ACH payment requests by logging into your chosen system (online portal or software). Navigate to “send payment” or “create debit” to input customer bank details, including the authorized payment amount and any recurring schedule. After entering information, confirm and submit the request.

Submitted requests enter the ACH network processing phase. Funds typically settle in one to three business days; some providers offer same-day processing for a fee. Processing time depends on initiation time, whether it is an ACH credit or debit, and bank cutoff times. Payments initiated late in the day, on weekends, or holidays process the next business day.

Manage ACH payments by monitoring transaction statuses and confirming settlements. Regular reconciliation with accounting records maintains financial accuracy. Businesses must be prepared for common issues.

ACH returns occur when a transaction fails or is rejected by the customer’s bank. Each return has a three-character code explaining the failure. Common reasons include insufficient funds (R01), account closed (R02), inability to locate account (R03), invalid account number (R04), unauthorized debits (R05, R10), or authorization revoked (R07). When a return occurs, you receive a notification with the code, and funds are reversed. Understanding these codes helps determine the root cause and if the transaction can be reattempted.

Disputes, also known as chargebacks, arise when a customer contests an ACH transaction. Reasons include unauthorized charges, incorrect amounts, duplicate transactions, or non-receipt of goods or services. Consumer accounts have 60 days to dispute; business accounts typically have two business days.

Customers initiate disputes by submitting a Written Statement of Unauthorized Debit (WSUD) to their bank, which can lead to automatic fund withdrawal. Providing proof of authorization is important to defend against disputes. Maintaining detailed records of transactions and authorizations is important for addressing returns and disputes.