What is Business to Business ACH and How Does It Work

Business to Business ACH

Table of Contents

As the name suggests, B2B ACH Payments are a type of electronic payment that allows businesses to transfer funds from one business to another for the goods and services they have provided. This type of ePayment is done through the Automated Clearing House Network which safely connects all banks and financial institutes in the United States.

As businesses increasingly adopt ACH, it has become a key method in enhancing cash flow management, offering a more efficient alternative to traditional payment methods like checks and wire transfers. With the B2B payments market projected to grow at an 8% CAGR through 2031, B2B ACH payments have become essential for businesses looking for cost-effective, fast, and reliable transaction solutions. 

What is Business to Business ACH?

Business to Business ACH refers to an electronic payment method used between businesses via the Automated Clearing House, or ACH network. As opposed to consumer ACH, which is applied to personal transactions such as direct deposit or utility bill payments, B2B ACH are applied to corporate transactions and can also cover paying vendors, payroll, or recurring expenses. 

ACH payments differ from other alternatives, including wire transfers. ACH vs. Wire transfers is majorly differ in terms of the cost and processing time. ACH transfers tend to be cheaper and more secure; however, processing time could be longer unless a company looks into faster ACH options like Same-Day ACH. 

 

Common B2B ACH Use Cases: 

  • Vendor payments 
  • Employee payroll 
  • Recurring business expenditures 
  • Tax payments 

 

How Business-to-Business ACH Works 

To have a better understanding of the process involved in how ACH payments work, here’s a step-by-step breakdown of the process involved: 

  • ACH Authorization Form Completed  : The initiating business fills out and signs an ACH authorization form, granting permission for the transaction to occur. 
  • ACH Transaction Initiation Through ODFI Bank : The Originating Depository Financial Institution (ODFI) sends a payment request to start the transaction. 
  • Payment Files Sent to RDFI via ACH Operator : The ACH network processes the payment files and sends them to the Receiving Depository Financial Institution (RDFI). 
  • RDFI Receives the Files : The receiving bank processes the transaction and prepares for settlement. 
  • Funds Deposited or Withdrawn : The RDFI credits or debits the business account based on the nature of the transaction. 

 

Different ACH Processing Speeds: 

 

Feature Same-Day ACH Next-Day ACH Standard ACH
Processing Time T+2 days (transaction date plus two) T+1 days (transaction date plus one) T+3 days (transaction date plus three)
Cost $8.99 per transaction $1.50 per transaction $0.50 per transaction
Cutoff Time Submit by 4:00 PM ET for same-day processing; after this, processed next business day Submit by 4:00 PM ET for next-day processing; after this, processed on T+2 Submit by 4:00 PM ET for same-day initiation; after this, processed next business day
Use Cases Urgent transfers (Bill Payments, Payroll) Transfers needed the next day (Payroll Adjustments) Routine transactions (Bill payments, Payroll)

 

  • Same-Day ACH: Same-Day ACH offers fast processing; however, it comes at a higher fee and is growing at a 10.08% YoY rate. In Q3 of 2024, Same-Day ACH volume grew by 67.5%, reaching 355.2 million payments.

 

Standard Same Day Business to Business ACH Process
Standard Same Day Business to Business ACH Process

 

  • Next-Day ACH: They are cheaper than Same-Day ACH but take a medium period for processing. 
  • Standard ACH: They process in 1-2 business days. 

 

Standard Same Day Business to Business ACH Process
Standard 3-day Business to Business ACH Process

In 2024, ACH payments reached nearly 7 billion transactions, showing its widespread adoption across businesses. 

B2B Payments by Dollar Value

 

Business to Business Payments Using ACH Growth
Business-to-Business Payments Using ACH Growth

  

 

 

Benefits of Using ACH  

B2B ACH Network Growth Since 2014- Dollar Value of ACH Payments by Type
ACH Network Growth Since 2014

 

  • Low Transaction Fees : ACH payments are more cost-effective compared to wire transfers, where fees can be substantially higher. 
  • Faster Payment Processing: Options like Same-Day ACH enable businesses to complete payments quickly. In 2024 alone, Same-Day ACH processing grew significantly, demonstrating its rising importance for urgent business transactions. 
  • Access to Payment Record: ACH payment systems allow businesses to track, reconcile, and store transaction records, ensuring better control over cash flows. 
  • Reduced Risk: With encryption and secure processing protocols, ACH payment solutions lower the risk of fraud. In 2022, the ACH network reported a decline in payment fraud attempts, demonstrating its growing security features. 

 

B2B ACH Payments 

As shown in the chart below, the transactional volume of B2B ACH payments has risen exponentially since 2014 where in 2014 the volume of B2B ACH payments was mere 2.71 billion in 2024 the volume rose to almost 7 billion.  

 

ACH Network Growth Since 2014 in Payments Volume
ACH Network Growth Since 2014

 

This below chart shows how ACH Network growth since 2014, in 2014 the Dollar value of ACH Payments was $26.66 Trillion where in 2024 the Dollar Value of ACH is almost doubled making it 54.2 trillion.  

 

Challenges of Business-to-Business ACH Payments 

  • Bank Processing Variability– Different banks have varying processing schedules, which can occasionally result in delays. 
  • ERP Integration Issues– Integrating ACH payments with Enterprise Resource Planning (ERP) systems may pose technical challenges. 
  • Managing Multiple Payment Methods– Handling ACH payments along with other methods like wire transfers, commercial cards, and checks can complicate workflows. 

 

How to Start Using B2B ACH Payments 

  • Set Up ACH Authorization– Businesses must complete necessary ACH payment setup and agreements with their bank to authorize ACH payments. 
  • Choose the Right ACH Provider– Selecting a trusted ACH payment processor is essential for handling B2B transactions securely and efficiently. 
  • Integrate ACH Payments into Your ERP System– Integrating ACH integration with ERP allows businesses to automate recurring transactions and simplify payment workflows. 

 

Can You Use B2B ACH for International Payments?  

Although there is no bar on using B2B ACH for cross-border payments, this method of payment remains largely a within the United States. For international payments, businesses mainly use the wire transfer or SWIFT network. ACH payments are limited in scope for cross-border transactions, making alternative methods like wire transfers more suitable for international dealings.  

 

Business to Business ACH vs Wire Transfers 

  • Cost Comparison– ACH transfers are significantly cheaper than wire transfers. ACH typically incurs lower transaction fees, while wire transfers can be expensive, especially for international payments. 
  • Processing Time– While ACH payments may take longer (unless using Same-Day ACH), wire transfers generally clear within the same day or next day, making them faster for urgent transactions. 
  • Security & Risk– Both payment methods are secure, but ACH payments offer more flexibility in terms of reversing transactions, reducing the risk of fraud. 

 

Zenwork Payments for B2B ACH Payments 

Zenwork Payments provides businesses with an easy and automated method for their B2B ACH payments. It deals with all kinds of vendor payments and offers safer and more reliable payroll processing on the same platform. Businesses will find Zenwork Payments to save their resources, ease their cash flow, and combine ACH easily into payment plans. 

 

B2B ACH FAQs 

1.What Information is Needed for a B2B ACH Transfer? 

Businesses need account and routing numbers, along with signed authorization forms to initiate ACH transfers. 

2. What Are the Fees Associated with a B2B ACH Transfer? 

ACH transfers typically come with low fees compared to wire transfers, making them an affordable option for businesses. 

3.What is the Difference Between ACH Transfers and Wire Transfers? 

ACH payments are slower but cheaper, while wire transfers offer speed at a higher cost. 

4.Can B2B ACH Be Used for International Payments? 

B2B ACH is primarily used for domestic payments, with international wire transfers being the preferred option for cross-border transactions. 

 

Conclusion

  • Essential Payment Method: B2B ACH payments are crucial for efficient electronic transactions between businesses. 
  • Cost-Effectiveness: They cost less compared to wire transfers; hence, they are a cost-effective payment method.  
  • Quick Processing Options: Same-day ACH enables businesses to deliver urgent payments effectively. 
  • Improved Security: Enhanced fraud protection measures make ACH a secure choice for financial transactions. 
  • Challenges: Despite challenges like bank processing variability and integration issues, the advantages of ACH are substantial. 
  • Growing Importance: The projected growth expected for B2B ACH payments reflects the increasing relevance of B2B ACH for cash management.