Electronic checks are a payment method used to process direct payments from a consumer or business bank account. An e-check can be either a debit or credit to a business account. Debits occur in the form of outgoing payments to employees, for supplies, or other business expenses. Credits are given for consumer payments. Electronic checks allow businesses to provide broader payment means to existing and prospective customers. This additional payment method encourages customer loyalty. Sales typically increase when more convenient options are added for customers. Electronic check processing has lower fees when compared to credit cards. It is highly efficient because consumers and business owners can manage everything online. Paper checks, invoices, and other documents raise company expenses and are time consuming. Reporting capabilities allow owners to see a list of transactions for easy reconciliation and billing management. Immediate validation of each payment and status updates keep businesses informed. Products can be shipped out faster. All consumer transactions are secure and protected.
Understanding the Application of ACH Processing for Both Businesses and Consumers
ACH processing and e-checks allow easy transferring of funds between bank accounts. Consumers may use them to deposit money into a specific account for use online or in person. They can submit electronic payments when paying bills or purchasing products online. This is accomplished by entering their bank routing and account numbers and selecting this form of payment. After all information has been entered, the consumer must authorize the transfer. Funds arrive in a few business days. Businesses also use this same form of payment to directly deposit an employee’s paycheck into their banking account. A paper authorization is typically signed before the deposit can be set up. Afterward, every check can be deposited on the necessary pay dates. Companies also use this payment form to pay vendors and suppliers. It is easier than compiling and mailing invoices to each one. Payments are made faster and business processes are not slowed down due to a supplier awaiting payment by check. ACH transactions are highly convenient for many purposes and are used by companies all over the country.
These transactions are processed by the Automated Clearing House electronically. This Federal Government network acts as a centralized location for fund transfers and reporting. Banks connect to the network for authorization and fund transfer requests. The company or individual authorizing the transaction is called the receiver. Originators are businesses or individuals that initiate the payment transaction. The originator actually prepares the information and then sends it to their financial institution. Transactions are collected and consolidated by the originators bank. They are then sent to the ACH operator. The files are then processed sent to the receiver’s financial institution. Entries are posted for the set settlement date Account statement reflect the debit or credit along with the balance change. This particular type of transaction can be completed within three or fewer business days. Having this ability reduces costs for businesses. Electronic processing also allows businesses to automate many payment processes and provide necessary customer conveniences.