ACH Payment Processing for Startups and Small Businesses

If you own a small company that is new, or even one that’s been around for several years, you can cut your payment processing expenses a lot by encouraging every retail and business customer to pay you via ACH (automated clearing house) payment processing, a same-day processing method overseen in the U.S. by the National Automated Clearing House Association for nearly 50 years.

There are several pieces to the ACH savings puzzle, so the most efficient way to see how the process works is to look at a real-world example, run through the basics of ACH processing, examine the benefits, and review some techniques for encouraging your current customers to opt for ACH (rather than credit cards) when they pay their bills.

First: An Example

Here’s quick, simple example of how much you can save by convincing even a few of your customers to pay their invoices with ACH as opposed to credit cards:

Say you have 9 business and individual customers who routinely buy $1,500 of goods and services per month. Typical credit card fees for those nine transactions would come to approximately 3 percent of the grand total (that’s the average credit card processing fee), plus around 30 cents per transaction. Lets ignore the number of transactions for the moment because that part is minuscule compared to the percent-based credit card fees you’re paying.

If all those folks are currently paying via credit card, your profits are taking a hit to the tune of $1,500 x 9 x 3 percent, or $391.50 in fees, just for the luxury of accepting plastic. Note, that’s per month, which translates to a whopping $4,698 per year you are dishing out in CC fees. What’s the alternative with ACH?

In most cases, you’ll pay just one percent on each transaction, no matter how large or small it is. Plus, there are no additional flat-fee charges per transaction. What’s the total in the above example if those same nine clients use ACH instead of plastic? Well, one percent of $1,500 is $15 per transaction, times nine transactions per month equals $135.

For an entire year, twelve months, that comes to $1,620 per year in ACH-related transaction fees. Compare with $4,698 per year for CC payments. Your savings in this rather typical scenario would be $3,078 each year.

What’s the bottom line?

  • ACH fees are closer to 1 percent per transaction, no matter the size of the transaction
  • Credit cards typically charge between 1.5 and 3.5 percent per transaction, or 2.9 percent for most startups and small business owners
  • ACH transactions are processed within one business day in most cases
  • Competitive small merchants offer ACH as a payment option for consumer and business clients alike
  • A key goal for entrepreneurs is to encourage payers to use ACH rather than plastic

The Basics of ACH

Security and speed are the hallmarks of ACH payment processing. Simply put, the method does nothing more complex than transmit funds from one person’s (or company’s) bank to another person’s (or company’s) bank. Within the ACH banking network, money flows quickly because there’s never a need for paper checks, plastic credit or debit cards, or additional parties to become involved.

Most of the time, the transmission takes just one business day, but it can take up to three business days. The major advantage with ACH comes in the paying of regular bills, also known as recurring payments. Examples of such payments include your monthly remittance to the local utility, a vendor who supplies you with raw materials, an accounting firm that does your payroll processing, or a law firm that handles all your legal matters.

It’s simple to “convert” over to making ACH payments this way because you are the payer, and have full control of the method you use to transmit funds. When it comes to how others pay you, you do not have full control. In other words, you can’t force your clients to use ACH if they’re in love with plastic. But, there are multiple ways of getting them to see the logic of using ACH. See the below section, “Encouraging Your Customers to Use ACH,” for details on that topic.

So, what about all those people who pay you? Easy. They can utilize ACH to do recurring payments or simple, one-time transactions. So, if Jane Doe pays your company once per month for services rendered or for products you deliver to her, she can easily set up a recurring ACH money transfer and not have to worry about paper statements or getting hit with a late fee for a forgotten payment. Millions of consumers use this method to pay their mortgages, car payments, and insurance premiums.

The Benefits of ACH

Even though most of the benefits of ACH have already been noted above, in the example and in the discussion about the basics of how the process works, here’s a quick summary, in list form, so you can see how this simple, popular methods of funds-transmission delivers powerful benefits to business owners, especially those who are on tight budgets and need to make every penny count:

  • Cost: Fees are significantly lower, to the tune of about 1.9 percent less per transaction
  • Simplicity of setup: It’s easy for customers to set up ACH because all they need to do is enter their bank’s routing number and the account number they wish to use
  • Point-of-sale speed: At the point of sale, it’s much faster for people to enter bank info rather than long CC numbers and security codes
  • No expiration troubles: Credit cards expire, but bank accounts don’t. The average consumer rotates through many credit cards but seldom changes banks
  • Super-easy recurring payment: For recurring payments, ACH is the way to go. Your clients and customers can set it up once and never worry about late payments or having to re-enter CC data again.

Encouraging Your Customers to Use ACH

There are lots of ways to gently, and in a friendly way, encourage your customers to use ACH instead of credit or debit cards. First, use an information campaign to let all your buyers know that you now accept ACH and you’d prefer that they use it so you can keep you prices low and offer better service.

Second, guide every new customer to set up ACH payment during the on-boarding process. This is a great way to slowly transfer over to an all-ACH payment system. Third, explain the benefits of ACH paying whenever current customers call with questions about anything, including late payments, new products, or general inquiries.

Become More Efficient Today

There’s no reason to be left out. Check what your competitors are doing in terms of payment methods. Look at their shopping carts and ‘accepted forms of payment.” You’ll likely notice that your most formidable rivals currently offer their customers choices like check payment, debit cards, credit cards, ACH, and perhaps a few others ways to pay.

At Metro Payment Technologies, we help merchants set up ACH payment systems every day of the week. In fact, as business owners come to realize the savings and simplicity of ACH payment processing, they not only ask us to implement secure systems for them but begin letting their own customers know that they now accept ACH payments in addition to other methods.

If you want to start offering ACH to your buyers asap, give us a toll-free call at 1-800-771-3719 to find out how you can be ready to go in a matter of hours. Visit our website for details about all the other products and services we offer to entrepreneurs, particularly startups, who need help streamlining the flow of funds. Now is the time to give your customers the fastest, simplest ways to pay.