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How to Receive ACH Payments: 5 Tips and Tricks for Your Business

how-to-recieve-ach-payments

If you accept payment via check, there are some compelling reasons to switch to ACH processing over traditional paper checks. ACH, which stands for Automated Clearing House, still draws on bank account funds, but this method of payment offers some key business advantages. Specifically, compared to paper checks, receiving payment via ACH can save time, money and is kinder to the environment at the same time.

If you’re new to receiving ACH payments, here are five tips and tricks to make the process smooth and hassle free.

Tip No. 1: Look For A Solution That Works With Your Other Payment Methods

While you may have customers who want to pay by check, paper checks are an inconvenient option because they require you to go to the bank and make deposits and the funds can be slow to clear your account. But if you’re considering receiving ACH payments and are looking at a separate processing solution from your other payments, then you’re still adding needless complication to your finances. Instead, look for an ACH payment processor that can handle your other transactions – including credit and debit cards, and even your e-commerce – to streamline.

Tip No. 2: Reduce the Manual Work of Ongoing ACH Payments With Recurring Billing

Subscriptions, payment installments and some other billing models mean you will receive ongoing ACH payments from the same customer. PayJunction’s Virtual Terminal can make this effortless due to the recurring billing feature, which allows you to automate these ongoing transactions. Recurring billing allows you to securely store a customer’s checking account information and, after receiving a one-time authorization from the account holder, automate transactions based on an agreed-upon billing schedule. When payments are declined, you’ll be notified. This saves the hassle of having to manually process ongoing ACH transactions.

Recurring payments can also reduce your risk of disputes. An account holder can only dispute an ACH payment under three scenarios:

  • If ACH payments were never authorized by the account holder.
  • If the ACH payment was processed on an earlier date than was authorized.
  • If the ACH payment is for a different amount than authorized.

As manual payment processing can increase the risk of errors such as accidentally running the transaction on the wrong date, automating recurring payments can help to reduce the risk.

Tip No. 3: Learn What ACH Rejection Codes Mean

From time to time, ACH transactions may be declined. But as there are a variety of reasons this may occur, you can save time determining the error and next course of action and prevent future failed transactions by first learning some common reasons ACH transactions fail and what the various reject codes mean.

  • “R01 Insufficient Funds” means the customer’s account does not contain a sufficient balance to cover the transaction; in this case, the customer will either have to add money to their account or use a different payment method.
  • “R02 Bank account closed” means the account no longer exists; if this account is being used for recurring payments, you will need to contact the customer for a new payment method, as future payments would receive the same rejection.
  • “R03 No bank account/unable to locate account” likely means there is a mismatch between the account data entered and the bank’s records. In such cases, your first course of action should be to confirm the account information and try again.
  • “R29 Corporate customer advises not authorized” means the customer’s bank has preventative measures in place against ACH payments. In such cases, you will need to ask the account holder to provide the bank with an Originating ID, which will enable ACH withdrawals from your business.

There are a number of reasons why ACH transactions may fail; in order to reduce payment delays and the risk of incurring NOC (notification of change) fees, it’s important to familiarize yourself with why and to regularly monitor and address unresolved rejections.

Tip No. 4: Make Sure You’re Collecting the Right Information from Customers

Another important way of reducing the risk of ACH rejections is making sure that you get the information you need from customers up front. In order to receive ACH payments – whether on a one-time or recurring basis, here’s what you’ll need:

  • Account holder’s first name and last name
  • Type of banking account
  • Bank account number
  • Routing number

Tip No. 5: Put Some Thought Into Your ACH Policy

While ACH may offer advantages such as faster payments, there are some risks. For example, like paper checks, ACH payments can return as non-sufficient funds, even if the transaction goes through at the time of purchase. If a customer fails to notify you of an account change, you might also incur an NOC charge (though your choice of payment processing providers can mitigate this – while some providers charge for every NOC, PayJunction’s Virtual Terminal autocorrects some account information so you only get charged once). As such, you might want to consider limiting ACH to ongoing, trusted clients and/or enacting a clear, transparent ACH policy that, where appropriate, passes along penalties to the customer.

Curious how ACH payment processing works?

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Which tip stood out to you the most and why? We’d love to hear how this piece may have helped you improve your ACH payments.


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PayJunction Team

Content written by the PayJunction team encompasses broad business topics including marketing, brick-and-mortar business operations and management.

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