How do ACH payments work?

Field Service, Financial Management

Last updated Nov 2, 2023 at 7:21PM | Published on Jul 11, 2022 | Field Service, Financial Management

There are many reasons why organizations are adopting ACH payments as a preferred method of accepting online payments. In a recent study, 68% of Chief Financial Officers (CFOs), reported an increased use of ACH at their firms due to digitization since the onset of the pandemic (Source: Pymnts). The typical life span of a credit card is about three years before it becomes lost, stolen or expired, while a bank account is typically held for 14 years, greatly reducing the chance of a missed payment through ACH vs. other methods.

With Fieldpoint Payments, our U.S. customers who are using QuickBooks and Microsoft Dynamics Business Central or GP, will be able to start collecting payments online, via ACH, credit cards and more.

ACH stands for Automated Clearing House and it is a fast, secure and cost effective way to transfer funds between bank accounts, through a direct debit of a bank account with an eCheck, or electronic check. The ACH system is able to handle a variety of transactions, including B2B, consumer and government. You may hear or read “ACH”, “ACH billing/payment” or “ACH payment system”: all of these descriptions refer to the same thing.

You may also be wondering: what are the types of ACH, how are ACH payments processed and how are they regulated?

Types of ACH

There are two main types of ACH transactions: direct payments and direct deposits.

  1. Direct payment ACH is used when paying bills, making a purchase or making a donation. Its focus is the electronic movement of money to make or receive a payment.
  2. Direct to deposit ACH is used mainly for payroll, or when a business (or government agency) makes a payment to a consumer.

The main benefit of using ACH is that you, the business, are paid directly from the customer’s bank account. This removes any risk of bounced checks, declined credit cards, and the like. Not only is this convenient for you, it’s convenient for your customers. Transactions are safer, quicker and less likely to have errors.

ACH Funding Cycle

The ACH processing cycle is known as “three-day funding”, referencing the three business days of verification each transaction undergoes. This three-day process ensures that your business does not receive any deposits for payments that haven’t been verified by your customer’s bank, preventing your ACH processor from having to go back into your back account to debit funds that are later returned as unavailable. This is the most efficient process to receive payments for electronic checks.

The day a transaction is entered is known as the “initiation day”, followed by three days of funding before the transaction is deposited. For example, an ACH transaction entered on a Monday will process on Tuesday and Wednesday, settle on Thursday, and deposit to your bank account on Friday. ACH batches close at 5 PM ET, so any transactions entered after that time will be included with the next day’s batch for deposits.

ACH Payments Operating Rules

Any business accepting ACH payments should be aware of the operating rules issued annually by NACHA, the National Automated Clearinghouse Association. It is a non-profit, and not a federal agency, but it works closely with the Federal Reserve, the U.S Treasury and state banking agencies. It manages the ACH network, the payment system that drives safe, smart and fast direct deposits and direct payments for all U.S banks and credit union accounts.

In a nutshell, NACHA requirements are meant to safeguard your customers’ sensitive financial and non-financial data, and ensure that all ACH transactions are handled smoothly and securely. Sensitive information includes things like bank account and routing numbers, social security numbers, driver’s license numbers, and more.

Get started with Fieldpoint Payments

You have the ability to accept customer payments in the field via Fieldpoint Payments, powered by Stripe, a leading payments acceptance solution. The Stripe system will track the status of the payment each day and provide an estimated settlement date for easy projections of your upcoming deposits. This type of real-time visibility is key for your accountings teams to make more accurate business decisions.

By using Fieldpoint Payments, your business will be covered for the most critical requirements, such as sensitive data protection, customer identity verification, fraud detection capabilities and a PCI-compliant policy. Our strategic partner, Stripe, offers strong web and database encryption, so it is compliant with NACHA’s secure transmission and data storage requirements. Additionally, it validates customers’ routing numbers, checking them against a database of valid possibilities.

If you’re interested in learning more about how this new integrated payment feature will work within the Fieldpoint platform contact us today or request a demo of Fieldpoint. Already a customer? Reach out to your Professional Services consultant or drop us a line at