What are ACH services?

As we become increasingly dependent  on the internet, it’s crucial that businesses and customers have access to electronic payments. The Automated Clearing House (ACH) helps make these payments happen. The ACH is an electronic network for financial transactions in the U.S. that enables you to electronically collect payments from your customers. Single-entry and recurring payments can be levied by directly debiting your customer’s checking or saving accounts. The most common uses of ACH are payroll direct deposit, online bill payment and mortgage and loan repayment.

How does it work?

The ACH process is quite simple. Here’s how the system works, according to the National

Automated Clearing House Association (NACHA):

  • An Originator– an individual, a corporation or other entity– initiates either a Direct Deposit or Direct Payment transaction using the ACH Network. Instead of using paper checks, ACH entries are entered and transmitted electronically, making transactions quicker, safer and easier.
  • The Originating Depository Financial institution (ODFI) enters the ACH entry at the request of the Originator. The ODFI aggregates payments from customers and transmits them in batches at regular, predetermined intervals to an ACH Operator.
  • ACH Operators receive batches of ACH entries from the ODFI. The ACH transactions are sorted and made available by the ACH Operator to the Receiving Depository Financial Institution (RDFI).
  • The Receiver’s account is debited or credited by the RDFI, according to the type of ACH entry. Individuals, businesses and other entities can all be Receivers.
  • Each ACH credit transaction settles in one to two business days, and each debit transaction settles in just one business day.

ACH payments. The benefits.

Direct deposits and Pre-Authorized Payments can save time and money for your business – as well as give you added convenience, safety and peace of mind. Payroll Direct Deposit, for example, eliminates the need to purchase, complete and reconcile payroll checks. Costs traditionally associated with payroll are dramatically cut, and employees see Direct Deposit as a benefit.

Or consider Pre-Authorized Payments. Actual financial transactions take place at a much quicker pace and can be set up to reoccur, adding certainty to the payment and billing processes. ACH transactions are cheaper and less complicated than check or credit transactions, stripping away another layer of hassle.

“When customers pay by check, businesses need to wait for the mail to arrive - then they need to get the check to the bank,” notes About Money banking expert Justin Pritchard. “Payments get lost sometimes, and entering those payments into a recordkeeping system is labor-intensive. Electronic payments are received more quickly and reliably, and there’s no need to forward checks to the bank and wait a few days to find out which checks bounced.


Learn more about Northwest’s direct deposit and pre-authorized payment services*

*Credit verification applies.