Business

What Is Business to Business ACH?

Panna Kemenes

20.11.23 (updated more than 1 year ago)

Read time 3 minutes

Business to Business Automated Clearing House (ACH) payments can help companies save time and reduce the risk of fraud.

Data from Nacha reveals that the adoption of same-day Business to Business ACH payments rose by 44% in 2022.¹

A recent PYMNTS survey also showed that although 92% of companies still chose to use paper checks for incoming payments, they are likely to switch to ACH payments for the added convenience and costs savings.²

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📝 In this article:
What Is Business to Business ACH? How Does Business to Business ACH Transfer Work? Can you use B2B ACH for International Payments? Business to Business ACH Charges Worth Knowing Pros and Cons of ACH Business to Business Payments Save Money on International B2B Payments with Wise Business

What Is Business to Business ACH?

🔍 Business to Business ACH refers to an electronic transfer of funds from one business to another. In this process, banks transfer funds from one bank to another through an automated clearing house (ACH).

Businesses can use this payment method to save time. Delivering checks can take longer and result in payment delays.

Another benefit of Business to Business ACH payments is that they can reduce the risk of fraud. Alternative payment methods, such as mailing checks, can pose a higher risk if the check is filled out incorrectly, or is delivered to the wrong address.

It can initially be time-consuming to set up ACH payments, as businesses need to fill out forms with sensitive information beforehand. However, the process is straightforward once you complete these initial steps.

How Does Business to Business ACH Transfer Work?

Before you send an ACH payment, you need to complete authorization forms. After this, you have to go through a few steps to initiate the process.

These 4 steps are necessary to complete a business to business ACH transfer:

Authorization: Both parties complete forms that authorize the bank to perform the ACH transaction.
Transaction Initiation: One party initiates the process via online banking or a third party ACH processor.
Sending the Payment: The Originating Depository Financial Institution (ODFI) sends the payment to the Receiving Depository Financial Institution (RDFI).
Processing the Payment: After this, the RDFI confirms that there are sufficient funds, and then sends the payment.

Can you use B2B ACH for International Payments?

It’s becoming much more common for businesses to make international payments. In 2020, around 43% of small businesses in the United States made an international payment.³

You can use B2B ACH for international payments. However, it’s important to keep several important factors in mind. Not every bank offers this service, and some banks may restrict certain countries. There may also be additional fees for international payments. It’s best to check with your bank before you consider this option.

Business to Business ACH Charges Worth Knowing

When you make B2B ACH payments, it’s essential to consider the fees and currency conversion rates. The business to business ACH charge may vary from bank to bank.

Some banks, like JP Morgan Chase, may offer 20-500 free ACH deposits for customers who pay a monthly fee for a business checking account.⁴ In some cases, it may be worthwhile to choose a higher tiered plan that allows you to do more business to business ACH debit transactions.

Another factor to consider is whether you plan to send domestic or international ACH payments. In general, you should expect to pay fees if you make an international ACH payment.⁵ In some cases, international ACH payment fees may be cheaper than wire transfer fees.⁶

Pros and Cons of ACH Business to Business Payments

Many small businesses choose to do ACH payments because of the convenience and the lower costs. However, there are some cases where it may be better to use other payment methods.

Pros	Cons
Transfers are typically free Easy to use Easy to keep track of payments No need to worry about lost checks	Initially difficult to set up Can sometimes take one or more days to process⁷

The most significant downside is that B2B ACH payments can sometimes take a day or more to process. If you need to send a payment quicker, you can try other methods, such as an instant money transfer.

You can also send or receive a wire transfer instead. However, banks usually charge a fee for wire transfers, especially international wire transfers.

Save Money on International B2B Payments with Wise Business

Wise Business can be a solid option for companies who frequently make international B2B payments. Wise can help your business as it expands globally.

Learn more about Wise Business

Wise is not a bank, but a Money Services Business (MSB) provider and a smart alternative to banks. The Wise Business account provides customers with low cost, quick and convenient payment options. It makes it easy to send, hold, and manage business funds in 40+ currencies.

You can also get 9 major currency account details for a one-off fee to receive overseas B2B payments like a local.

Sources

All sources checked November 20, 2023.

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