Business to Business ACH

What Is Business to Business ACH?

Business to business ACH involves the electronic transfer of funds between businesses on the Automated Clearing House Network. ACH transfers enable businesses to either make payments for services, or request payments for services without a costly paper trail of checks, money orders or other traditional payment methods.

ACH is the electronic payment system used to move money from one bank to another in the United States and abroad. Transactions on the ACH Network include direct electronic payments and automated money transfers that have reduced the need for paper checks, wire transfers, credit and debit cards, and cash.

Millions of payments are stored and processed in batches throughout the day to maximize the number of transactions that can be processed all at once versus on an individual basis.

How Business to Business ACH Works

B2B ACH payments allow businesses to offer their clients a direct, more secure and automated payment method. Clients don’t have to use a credit or debit card to pay for services, and can instead initiate ACH credit or ACH debit payments that transfer funds directly from one account to another.

ACH credits add funds to a receiving account, while ACH debits request to remove funds from an account to make payment. Since B2B ACH payments can be automated, ACH debits are great for businesses with recurring billing to multiple clients or vendors.

Who Is Involved With B2B ACH Transactions?

In every transaction on the ACH Network, funds transferred from one account to another must go through one of two institutions to ensure accurate and efficient processing - The Federal Reserve or The Clearing House.

The bank of a business that initiates an ACH transaction is called the Originating Depository Financial Institution (ODFI). The bank of a client receiving payment or being requested to make payment is called the Receiving Depository Institution (RDFI).

B2B ACH transactions involve funds from the ODFI getting stored and processed by either The Federal Reserve or The Clearing House causing most ACH transactions to typically take 1-2 business days to fully settle. However, funds are increasingly made available to receiving accounts same-day and in real-time.

H2: Benefits of Business to Business ACH

Whether you run your own small business or work at a large corporation, business to business ACH payments are a perfect way to help you save time and money, and makes managing your bills easier and more intuitive via online banking services.

Zero processing fees

B2B ACH transfers are typically free of any processing fees, making them ideal for businesses who must make frequent payments to a number of different clients. Fees can easily add up for every payment made, and this method eliminates any cost for concern.

Cost-effective transaction fees

Other electronic payment methods like wire transfers or credit card processing come with higher transaction fees compared to B2B ACH payments. Transfers on the ACH Network are usually free, but depend on the policies of the financial institutions involved in a transaction.

Simple setup for clients

The only required information to initiate a B2B ACH payment is the bank of account number and routing number of both parties involved. This not only makes setup easier for clients, but more secure than credit cards whose numbers change more frequently than direct bank account information.

Easy access to electronic payment records

Businesses can track payments for invoicing with ease thanks to artificial intelligence and machine learning technology that speed up the time it takes tracking down paper payment records.

How to Set Up ACH Payments for Business

Setting up payments for businesses is easy with Envestnet | Yodlee’s Payments Solutions. Envestnet | Yodlee acts as a mediator between your business and the ACH Network, and provides an ACH processor to businesses so they can accept payments on the network.

What Information Is Needed to Make an ACH Payment?

All that is needed to make an ACH payment is a client’s bank account number and routing number. As long as there are sufficient funds in the ODFI’s account initiating the payment, funds will be received within 3-5 business days depending on the time and type of patent.