Last editedJan 20222 min read
Business to business ACH refers to the electronic transfer of funds from one business to another via the Automated Clearing House Network. ACH allows businesses to make payments for services and efficiently request payments for services. It is considered a superior and simpler solution for service payment when compared to more traditional payment methods.
In this post, we’ll answer the question what is business to business ACH in detail, as well as offer advice on how to set up payments for business with GoCardless.
Business to business ACH explained
ACH stands for Automated House Clearing. It is an electronic payment system designed to transfer funds from one bank to another within the United States and also abroad. Transactions on the ACH Network comprise automated transfers and direct e-payments. The method therefore makes traditional wire transfers as well as old fashioned paper checks, redundant.
How business to business ACH works
B2B ACH payments permit businesses to give their clients direct, safe and automated methods of payment. This means customers do not need to use their credit or debit card to pay for services but rather are able to complete payments using ACH and transferring the owed funds directly from their account.
ACH credits transfer funds to the recipient, while ACH debits request the removal of funds from one account in order to be credited to another.
Due to Business to business ACH being automated, they are ideal for businesses which have recurring bills set up with several clients.
Every transaction which takes place on the ACH network must pass through The Federal Reserve of The Clearing House.
The bank of the business initiating an ACH transaction is known as the Originating Depository Financial Institution (ODFI). The bank of the client who is receiving payment or is being requested to make payment is known as the Receiving Depository Institution (RDFI).
The process of B2B ACH involves the money from the ODFI being examined and processed by either The Federal Reserve or The Clearing House. This entails that the transactions will take one to two business days to be finalized.
Advantages of business to business ACH
For small businesses and huge corporations alike, business to business ACH is a great way to make payments for services as efficiently as possible, saving you both time and money. Below are some of the main advantages of using business to business ACH.
No processing fees
There are typically no processing fees involved in B2B ACH transfers, making it the most cost-efficient way to make payments to multiple clients over a time period.
Low transaction fees
Wire transfers and credit card payments often come with a higher transaction fee than B2B ACH payments. In fact, transfers on the ACH Network are typically free; however, this can change depending on the particular financial institutions involved in the transaction.
Simple to use
Using business to business ACH is very straightforward. The only necessary information to initiate the payment is the bank account number and routing number of both the payee and the recipient. The simplicity of the process makes it far easier for clients to use.
Access to payment records
When using B2B ACH, it is easy to track payments and keep records of transactions. Having these stored and easily accessible makes keeping track of transaction history and company finance simpler.
Business to business ACH with GoCardless
GoCardless makes it incredibly easy to take B2B payments via ACH bank debit. It’s suitable for invoicing, other recurring payments, and one-off and instant payments as well, via Instant Bank Pay.
We can help
GoCardless helps you automate payment collection, cutting down on the amount of admin your team needs to deal with when chasing invoices. Find out how GoCardless can help you with ad hoc payments or recurring payments.