FASTER MONEY – Process your banking transactions electronically

FASTER MONEY – Process your banking transactions electronically

We all want to make money fast, most often by doing more business; however it can also be done by moving money faster. Some recent changes in the US banking system have improved the speed with which cash moves around. In addition, the use of the internet makes it simpler and quicker to make payments and collect receivables. These changes can help you manage your cash better and reduce the cost of administrating receivables.

The US bank systems have developed very slowly compared to banking systems in other parts of the world due to complex legislation. Until very recently a bank would not provide cash against a check until the original check had been presented. In mid 2005 a major change in legislation made it possible for banks to pay against check copies transmitted electronically within the banking system. This change speeds up the transfer of available cash and eliminates the float time; practically it means that fewer checks are put on hold and funds are made available sooner than before.

In addition to improving the checking system banks have taken advantage of the internet and created a service called Automated Clearing House Network (ACH). With ACH a company has access to flexible options for delivery of payment and processing services which ensure that funds are transferred securely and settled accurately.  On the debit side funds can be collected from customers rather than the customer sending their payment via check or wires.  On the credit side payments can be made directly to vendors, employees and tax accounts without the cumbersome process of printing, processing and mailing checks.

By use of ACH a business can take advantage of the Federal Reserve banks interbanking system. With ACH it is as easy to move money in and out of customers and vendors accounts with the speed of a wire payment but at a fraction of the cost. The only technical requirement is a high speed internet connection.

Setting up ACH requires first of all that your bank can provide the service, however most major banks do and smaller banks are quickly subscribing to the development of this program.  Obviously you’ll have to be in good standing to be able to use ACH; in essence your bank delegates its ability to access different accounts to you while taking the responsibility for any mistakes you make. Be assured that the documentation provided by your bank is very much in their favor.

Paying Through ACH

To make payments all you need is the recipient’s account number and the ABA number of the receiving bank. Many service providers, utilities, & large corporations have online ability to set this up.  Maybe a time investment up front can save you later?

The benefit of ACH is that you no longer need to use checks, which, when you think of it, is a rather costly way of making payments. Just the physical check, the envelope and the stamp is close to a dollar even before you consider the handling costs. Once you get started you’ll most likely use a combination of checks and ACH depending on your vendors.

Receiving Through ACH

When it comes to collections there are more benefits than with payments; you collect when the bill is due which improves cash flow. You control the collection, in other words provided the account from which you collect has available funds. You are not dependent on the counterpart’s actions to make the payment. Finally, you’ll receive the payments directly in to your bank account and avoid the process of collecting and depositing checks.  If you have 500 rental customers this is a significant reduction of administrative work and much cheaper than the 2-4 % fees for credit cards.

The challenge with starting to collect via ACH is that your existing customers may not be interested in switching and it is going to take some time before you can implement this program. If you see the benefit of ACH collections perhaps you can give an incentive to those customers who subscribe to this payment method. As usual the transition period and process will be cumbersome but when it is done you’ll find that you have a more efficient administration.

Talk to your local business bank representative about ACH and what your bank requires for setting up this type of program. Review your routines and talk to your vendors and customer before you start using ACH. Finally, be prepared for the customers and vendors that never will adapt to change. You will find some that want to change and some that do not have the routines in place to handle the change.

ACH may not be widespread today but it is a more efficient way of processing payments and collections. Just like the Internet was available only to the computer geeks in the 1970’s and 80’s; ACH will replace checks and wires sooner than we think

Author Bio


Mr. Anders Norlin, owner of Box Credit LLC a company that provides financial solutions and advisory services to the portable storage and container leasing industry.

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