If you own a business and want to eliminate traditional checks, secure your payment process, and enhance cash flow management, ACH (automated clearing house) might be the ideal payment process for you. At Live Oak Bank, we understand that each business has unique needs to help their business thrive, which is why we offer customizable options for your business bank accounts. Marien Stark, Director, Treasury Management at Live Oak Bank says, “Our team at Live Oak has seen firsthand how moving to ACH transforms a business’s daily operations – freeing up their employees’ time, making their payments more secure and even improving their cash flow.”

Here’s a quick summary of what you’ll learn in this article:

• What ACH Is: ACH is an electronic system enabling businesses to transfer funds directly between bank accounts, eliminating the need for traditional paper checks.
• Speed Advantage: ACH payments process significantly faster than checks (typically 2-3 business days), reducing delays associated with mailing and manual handling, thus improving cash flow.
• Enhanced Security: By reducing reliance on paper checks, which are prone to fraud, ACH offers a more secure method for transferring funds electronically.
• Streamlined Process: ACH simplifies payments into a few digital steps, removing the manual effort of writing, signing, and mailing checks, making operations more efficient.
• Key Business Use Cases: ACH is ideal for crucial business transactions like paying vendors, processing employee payroll via direct deposit, and making electronic tax payments, enhancing reliability and timeliness.

What is ACH?

ACH is a payment process that simplifies electronic funds transfers between bank accounts, much like direct deposit. When using this payment process, you can transfer funds to accounts held at other banks; the recipient’s account does not need to belong to the same institution as yours.

Beyond these direct transfers, ACH also powers a multitude of everyday financial interactions. Popular person-to-person payment platforms like Zelle, often use ACH to facilitate the transfer of funds. Many online services, from subscription boxes to streaming services rely on the ACH infrastructure for those automated deductions from the user’s account.

Why ACH is worth it for your business

Speed Advantage: ACH payments are typically completed in 2-3 business days, cutting the time needed for mailing and depositing a check by at least half. There are many delays associated with traditional check writing and mailing, including lost or misdirected mail, human error in filling out the check, recipient availability, etc. With ACH, once the payment is initiated, you can have confidence that it will be processed without unexpected hold-ups.

Enhanced Safety and Security: Checks remain to be the payment method most susceptible to fraud with 80% of organizations reporting that they were a victim of an attempted or actual payment fraud attack. By limiting the use of checks in your day-to-day business operations, there is less opportunity for fraud incidents to happen. The best way to combat check fraud is to be proactive with the use of electronic funds transfer like ACH, where the vulnerabilities of a physical check do not exist.

If you still prefer the familiar, tactile experience of paper checks, Live Oak Bank also provides an optional add-on called Check Positive Pay. This service protects your business against check fraud by matching the details of checks presented for payment from your account with a list of checks you’ve issued. Any unmatched checks are flagged and reported.

Streamlined Process: Instead of the multi-step process of finding a checkbook, filling out payee details and amounts, signing the check, and mailing it, an ACH transfer streamlines the process to a few simple digital steps. “For many of our clients, the faster processing time with ACH means not only efficiency but a competitive edge in managing cashflow”, says Stark. For example, we offer unlimited ACH origination transactions, further enhancing this efficiency for your business. With ACH, you simply put in the information, authorize the payment, and the funds are safely transferred. This eliminates the need for physical materials and trips to the post office, offering a more convenient and efficient way to send and receive money.

Tax payments become seamless through electronic transfers, and paying employees is simplified by replacing manual checks with direct deposits to their chosen accounts. Your business will become more reliable and timelier.

How to reduce your business' reliance on checks

One of the first steps in streamlining your business’ payment process is to slowly move away from your reliance on checks, and to encourage customers to utilize electronic payment methods. Here are a couple of tips:

• Promote ACH as a preferred payment method: Make it clear on your payment instructions that ACH payments are welcomed and encouraged.
• Offer incentives for electronic payments: Consider providing a small discount or loyalty points for customers who choose to pay electronically.
• Encourage recurring ACH transfers: For customers or vendors with regular payment scheduled, setting up recurring ACH transfers is a powerful way to eliminate the use and time needed for check payments, ensuring timely and consistent income.

Beyond sending out ACH payments, our services also enable you to collect funds directly from your customer’s accounts via ACH. This “pull” technology, with proper authorization, is a great tool to accelerate your accounts receivable cycle, reduce payment delays, and foster a more solid payment relationship with your customers. It offers a reliable alternative to waiting for customers to initiate payments through different methods, which can be time-consuming.

The ACH advantage

Transitioning from manual check writing to ACH can enhance speed, security, and efficiency while offering customizable solutions that empower your business operations. Embracing the capabilities of ACH is an investment towards streamlined processes and enhanced control over transactions. “ACH is an essential component of modern financial management, and Live Oak Bank is committed to providing our customers with robust and user-friendly ACH services”, says Stark. For businesses looking to leverage these benefits and explore user-friendly ACH services, learn more here.