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Why ACH is Better Than Paper Checks for B2B Payments

Feb 19, 2021 12:06:08 PM

ACH vs Checks

It has been nearly a year now since many businesses left the office in response to COVID-19. Since then, all business leaders have been trying to figure out how to improve their processes and operations while their workforce continues to work remotely.

One of the biggest hurdles that many B2B companies face is the ability to accept and process payments quickly. 

Savvy B2B business leaders are turning to ACH as a solution… but is that the right solution for your company? Read on to learn why ACH is better than paper checks. 

What Is ACH?

ACH stands for Automated Clearing House, which is the electronic network that allows for direct transfer of funds between two bank accounts

Founded in 1974, the National Automated Clearing House Association (NACHA) develops, administers, and governs the ACH network. In other words, all ACH processing is handled by NACHA. Think of them as an intermediary. 

The most common example of ACH (AKA “eChecks”) is as a direct deposit method for paying employees. This is not the only way to use ACH. Many B2B companies rely on ACH to simplify Accounts Payable (AP) and Accounts Receivable (AR) as well. 

Why ACH Is Better Than Paper Checks?

It’s not just the pandemic that made paper checks difficult. There is a reason why digital payments have taken over the modern world. Think about it: When was the last time you were at the grocery store and had to stand in line behind someone writing a check for their groceries? It’s been several years, hasn’t it? (That’s because nobody likes checks.) 

In fact, according to the 2019 AFP Electronic Payments Survey Report, the Association for Finance Professionals (AFP) found that check usage for B2B transactions declined by nearly half from 2004 to 2018. Check payments accounted for only 42% of business customer payments by 2018. 

Why this decline? Well, there are 5 clear reasons why ACH is better than paper checks. 

Now that we have not mentioned those germs (wink), here are the 5 reasons why ACH is better than paper checks:

  1.   Speed 

Paper checks are slow, archaic, and incredibly time consuming to process. They typically take several business days to move funds whereas ACH requires a quick initial setup, after which each batch transaction will take about a day or two to process – even for international transactions. 

ACH payments are also given preferred funding treatment over paper checks, which basically means that your ACH payment will get to cut in line in front of paper checks

It also cuts the mail service out of the payment process. This helps accelerate collections because, as we all experienced over the past year of the pandemic, the mail only seems to get slower. 

  1.   Cost Effectiveness

ACH costs less than credit card processing fees and it also costs less in time and labor than paper checks. 

According to the inaugural AFP 2015 Payments Cost Benchmarking Survey, the estimated median cost of a check transaction is $3.00, compared with .26¢-.50¢ per ACH transaction or $1.50 for a credit or debit card transaction

In addition, ACH payments can be automated, which helps B2B companies like yours take advantage of early payment discounts and even more time and labor cost reductions. 

  1.   Efficiency

In terms of convenience, ACH is better than paper checks because it requires no trips to the bank, no postage to mail, and no piles of paper on your desk. ACH is also available for recurring billing, which takes all effort and thought out of the payment process entirely – for both your payments and your customers’ payments to you. 

ACH is also more efficient because it helps eliminate data-entry errors in your AP and AR processes. 

In addition to all of these efficiency-boosting benefits, it also cuts down on waste. In general, ACH is a greener way to process payments, now and for the future. 

  1.   Security

As everyone knows, the more people there are involved in a process, the less secure that process is going to be. ACH eliminates all the middlemen from the entire paper check process, creating a more secure, streamlined system for handling payments. 

According to the 2020 AFP Payments Fraud and Control Survey Report, 81% of companies were targets of payment fraud in 2019, with 74% of organizations experiencing check fraud in 2019—up from 70% in 2018. 

As an added security bonus, ACH payments cannot get lost or misdirected by the mail service, which, as we said earlier, is having an awful lot of problems right now.

  1.   Customer Satisfaction

Processing paper checks for B2B payments is much more difficult when everyone at your company is working from home. Providing an alternate, digital payment method such as ACH can ease the stress of remote payment processing and eliminate the possibility of late payments

This simplicity makes customers happier, which is why, over the past two decades, more and more customers have been switching to ACH payments instead of paper checks. 

According to the 2019 Federal Reserve Payments Study

In 2018, for the first time, the number of ACH debit transfers (16.6 billion) exceeded the number of check payments (14.5 billion). In 2000, in contrast, the number of ACH debit transfers stood at 2.1 billion compared to 42.6 billion check payments.

The Facts Are In: ACH Payment Is Better Than Paper Checks

In summary, paper checks are a hassle. They are germy, time-consuming, inefficient, unsecured, and nobody likes them. This assessment may sound blunt… but, seriously, do you disagree?

The only question left is: Is your company ready to make the leap to ACH?
The payment processing experts at APS Payments can help.

In a COVID-positive world, your company does not have time to deal with an expensive and lengthy ACH setup process. To ease your transition, the payment experts at APS Payments offer seamless credit card and ACH integrated payment systems for multiple ERP solutions, and offers an online payment portal, APS ClickToPay, which puts ACH paying power directly into the hands of your clients. 

2021 Payment Trends

Jeff Kohl
Written by Jeff Kohl

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