Frequently Asked Questions: Business Check Processing

What is business check processing?

Business check processing, also called ACH processing, refers to a network that handles the electronic transfer of funds from businesses to businesses and from businesses to consumers. ACH processing is a paperless alternative to the processing and sorting of paper checks. The most common types of check processing for businesses are direct payroll deposit and the electronic transfer of funds to other corporations.

What does ACH stand for?

ACH stands for Automatic Clearinghouse. It is the system responsible for electronically connecting all of the financial institutions in the United States.

How much does business check processing cost?

ACH processing is much cheaper than both paper check handling and wire payments. Typically, the average ACH transaction costs 2.5-25 cents. The low cost of transactions is a major driver of ACH’s popularity.

Who originates the transfer of funds?

An ACH entry begins with a receiver authorizing an originator to create an ACH debit or credit to a bank account. Originators can be people, companies, or your employer, to name a few. The originator has to receive written, verbal, or electronic authorization for the transaction from the receiver. After authorization is obtained, the originator creates an ACH entry that is passed onto any financial institution that does ACH origination (a.k.a. business check processing). The entry is then sent to an ACH Operator, typically the FED, and is passed onto the receiver’s financial institution. The receiver’s account is then debited or credited, depending on the nature of the ACH entry.

Why should I used business check processing?

Business check processing can help you cut costs and boost profits by offering enhanced efficiency. Rather than dealing with the hassle of paper checks, you can manage your transactions electronically. ACH transactions are faster, cheaper, and much more flexible than the traditional paper check system. ACH processing also may improve your appeal to employees and customers, as you will be able to offer things like direct deposit and automatic bill pay.