As communities begin to recover from the effects of COVID-19, businesses also are starting the long process of returning to normal – slowly, but surely. And there are definitely some lessons learned. The key one, of course, is how to make payments remotely.
For some small and medium-sized businesses, before the pandemic, writing and mailing a paper check (and worrying that it may get lost or stolen in the mail) or even picking up a paper check and taking it to the bank were merely a hassle. But when businesses, vendors and suppliers suddenly began operating remotely to comply with state quarantine rules – leaving no one in the office to collect the mail – paper checks became an impediment to paying bills and managing cash flow.
Many small businesses found that having the option to pay via ACH, or the Automated Clearing House Network, was a saving grace as electronic payments provided a simpler, more automated way of paying for their orders, goods and services.
Whether businesses know it as Direct Deposit, Direct Pay, EFT or electronic check, ACH payments are easy, convenient, low cost and secure. There are two forms of ACH payments: an ACH credit in which a payment is made from a business’ bank to its vendor’s bank, and an ACH debit in which a business provides its routing and account number to each vendor so it can pull the payment from the account.
For a business that is already set up for ACH and wants to pay more vendors or suppliers electronically, here are some best practices:
- When you need a vendor’s routing and account information, call them. By speaking to someone (preferably your known contact at the vendor) in the accounts receivable or billing department, you can find out the process for paying via ACH. Another tip is to call the vendor’s treasury department.
- Check the vendor’s website. There may be ACH payment instructions there.
- Review your original contract with the vendor. It may include ACH payment instructions.
- Check your invoice to see if the vendor has provided instructions there.
An ACH debit payment in which funds are “pulled” from the customer’s account is also known as a Direct Payment, and is a popular option that is convenient and saves costs compared to other options. For a business that wants to allow a vendor to debit the payer’s account, here are some best practices:
- You can authorize a one-time payment, or recurring payment, and then the vendor simply pulls the agreed amount from the account.
- Another option is to work with a third party accounts payable service that maintains vendor routing and account numbers that can help route payments to your vendors via ACH.
While some businesses may hesitate to allow their accounts to be debited, it really is a common, hands-free practice where you don’t have to worry about setting up anything in your system – just like when a consumer authorizes the utility company to debit the consumer account to pay a bill, for example.
And if something does go wrong with the debit payment, a business has safeguards and rights including:
- Within two days, you have the right to call your bank to dispute an authorization for a payment withdrawn from your account, and your bank will have to make you whole.
- You can work with your bank to set up debit filters where one vendor or multiple vendors are authorized to debit your account while others are not.
The best practice of all is to make ACH your business’ preferred payment option, and not return to paper checks. ACH payments are safer, cheaper, more efficient and are a more confidential way to do business.
For more information on how to leverage ACH for your business, visit ACHQuickStart.org, an online resource for your business to learn how to pay or get paid by other businesses electronically via ACH.