Millions of payments are made each day through the Automated Clearing House (ACH) Network. Money moves, seemingly effortlessly, between accounts to the tune of 5.7 billion transactions per quarter. But, how does it work, and how can allowing clients to make ACH payments benefit your accounting firm?
ACH Payment Processing in Four Steps
Thanks to a nationwide network, ACH payments can be processed quickly and seamlessly. Here’s how a typical ACH payment is processed:
Step 1: The ACH request is initiated
The originator requests a transaction be made. This transaction can be a direct deposit, a bill payment, a person-to-person transfer or any number of other types of ACH payments. The originator can be an individual, a client or an employer – anyone with a financial account can be eligible to make ACH payment or transaction.
Step 2: The ACH transaction is batched by the originator’s bank
The ACH payment request is collected, along with other requests, by the financial institution where the consumer requested it. All the payment requests are gathered into a batch by the financial institution (technically known in this case as the ODFI or Originating Depository Financial Institution).
Step 3: The ACH transaction is sent to the receiver’s bank
The transaction batch is passed to an ACH Operator, then all transactions received are sorted and re-batched to go to the financial institutions indicated by the originator.
Step 4: The ACH transaction is processed to the receiver
The financial institution where the receiver’s account is (the Receiving Depository Financial Institution), receives the transaction and either deposits money into the receiver’s account or pulls money from it, depending on the original ACH payment request.
So, that’s the technical process, but here’s what matters to you: how can you use ACH payments to help your business, and what does that look like for your customers?