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Freshbooks payments just got a whole lot easier (and cheaper) for you. The accounting software company recently introduced ACH transactions, a method of payment that eliminates the headache of paper checks and bookkeeping details.
What is ACH?
ACH stands for Automated Clearinghouse, which is a network that connects banks in the United States. The process is quite simple. You send a batch of transactions through the ACH, they process the information, and then send it through to the recipient.
The National Automated Clearinghouse Association (NACHA) states that the ACH currently processes two types of transactions: direct deposit (payments directly deposited to your account) and direct payment (payments withdrawn from your account on a recurring basis).
ACH vs EFT vs Wire Transfers
Hang on a second. This is all sounding a little familiar. What’s the difference between a wire transfer and an ACH payment? Aren’t ACH payments sometimes used interchangeably with EFT payments? Are they the same?
It’s confusing to know which terms mean what, especially when they all share similarities. But, we’re here to break down the basics.
- Wire transfers, ACH payments, and EFTs all allow you to send money electronically.
- When you transfer through the ACH, you’re only transferring through the Automated Clearinghouse. Wire transfers and EFTs are done through the bank.
- The ACH offers a bit more security in your transactions.
ACH vs EFT
Yes, the two terms are used interchangeably at times, but they’re not exactly the same. The reason for the confusion is that an EFT (electronic funds transfer) refers to any online transaction that transfers funds from one account to another, including ACH payments.
ACH vs Wire Transfers
Instead of completing transactions through the ACH, wire transfers use banks. Both payment options allow you to send money electronically from one bank account to another, but wire transfers tend to reach their recipient faster. That said, ACH payments are more secure.
ACH payments also allow you to send transactions in groups as opposed to wire transfers, which are usually done one at a time.
How Can ACH Transfers Help My Business?
Excellent question! With companies like Freshbooks introducing this method of payment, your day-to-day as a business owner gets way easier.
ACH transactions are much faster than your traditional paper checks. Anyone can tell you that checks need to be filled in, signed, delivered, and deposited. But even after you stick it in your bank account, you need to wait a customary period before that money goes through.
Additionally, even when the check does go through, you need to manually mark down in Freshbooks when you received that payment. ACH eradicates the headache associated with these small bookkeeping details; Freshbooks makes a note as soon as the money is in your account and you don’t need to lift a finger.
ACH transactions are also much cheaper. When you’re a company handling large invoices, transaction fees can skyrocket. But, ACH payments have a one percent transaction fee for doing pretty much the same job as a wire transfer.
Things to Keep in Mind
An important detail to note is that Automated Clearinghouse currently only deals with banks located in the U.S.
ACH payments may also take longer to reach your account. Wire transfers and EFTs take approximately 24 hours (or up to five days if you’re sending internationally), but ACH payments may take anywhere from three to five days before getting deposited. The good news is that Freshbooks is aiming to have same-day deposit by the end of 2019.
Consumers and businesses alike also need to take caution against reversed ACH payments. Though it’s much harder to stop a wire transfer, ACH payments can still be reversed before the money goes through.
How Do I Set Up ACH Through Freshbooks?
To reap the benefits of Freshbooks’ new feature, all you need to do is enable Freshbooks Payments in your account. As soon as that’s done, you can give your customers the option of paying through ACH. Clients can then set up their bank account to deliver payments to you. As an added bonus, Freshbooks Payments checks that your clients have sufficient funds before allowing a transaction to go through.
ACH payments are the way to go if you're looking for a way to better your business. Not only are they much faster than traditional methods, but your clients can rest easy knowing their transactions are handled with a bit more security.