Wire Transfers vs ACH Payment Processing
| |In today's accounting world, accountants can benefit greatly from both wire transfers and ACH payment processing. Each form of payment offers unique benefits for specific situations worth considering. In order to decide which electronic payment method to recommend, it's necessary to look at the roles of each.
ACH Payment Processing (also called eCheck)
Processing payments through an automated clearing house (ACH) means that you're using an electronic network that works with several financial institutions in order to process transactions in groups or batches. The result is similar to a wire-transfer in that the money is shifted from one financial institution to another.
However, it's not a real-time transaction the way a wire transfer is. The good news is that batch transactions usually show up within three to five business days. In some cases, they show up the next day.
This is far better than the traditional method of invoicing and waiting 30 to 60 days for the paper checks to arrive (and then waiting the additional time required for the check to clear after depositing it into your bank account). In this way, the ACH payment processing provides accounting firms with a secure way to capture payments faster than the old fashioned way.
There's also the versatility factor with ACH payments. ACH payments work well for online bill payments, payroll direct deposits, person to person (P2P) payments, and more. Some individuals even receive social security benefits and federal income tax refunds through ACH.
While some banks or financial institutions may charge a small fee for ACH payment processing, the speed more than offsets the processing costs. While ACH payment processing may be inexpensive, it is not immediate.
The home run on ACH processing is for recurring payments that are predictable. If you have a set of clients who pay you a predictable monthly or quarterly fee, getting them onto ACH is a slam dunk.
Wire Transfers
Wire transfers still play an important role in today's electronic banking world. Wire transfers are instantaneous transfers — within seconds in some cases — of money from one bank account to the next.
Accounting firms, in particular, benefit greatly from wire transfers as they are ideally suited to facilitate the instant transfer of funds from the business bank account, for instance, to a payroll processing center, if needed. Also, many international based clients prefer to use wire transfers to conduct business as well.
Further, wire transfers that occur between bank accounts are authenticated. This means the identity of the person on the receiving end is verified so that you're certain the money is going to the person you intend to receive it. This reduces the chance of fraud in the transfer process and makes the transfer more secure.
On the downside, there is typically a fee involved in wire transfers. In some cases, the fees are substantial. This is often the deal breaker for those sitting on the fence between wire transfers and ACH payment processing (same day versus 3-5 days).
The Bottom Line
When it comes to transferring money from one account to another, there is no clear winner. Different business needs at different points in the business cycle make one or the other more appealing. The key is to make sure you're matching the right needs at the right time to maximize ACH payment processing and wire transfers to their fullest benefit.
Most importantly, you want to put your accounting firm into the position to accept both ACH and bank wires conveniently with one integrated payment solution.
Note: Build Your Firm's ePay payment processing tool accepts payments from ACH, bank wires and credit cards. Three electronic forms of payment to accelerate your cash flow.
