Are you making and receiving payments through ACH in your construction business?

ACH is often misunderstood, forgotten about, or mixed up with a wire transfer. Yet ACH transfers are quickly becoming the regular standard of payment. Almost all Americans get their paychecks via direct deposit. Same-day transfers were up 74% between 2020 and 2021, and total ACH network payment volume was up nearly 9% year over year. Find out what an ACH transfer is and how you can set one up to collect payments from your customers.

First, the definition: an ACH is an electronic transfer of funds between two banks or credit unions across the Automated Clearing House (ACH) network. The ACH network is an interconnected digital system that processes mostly domestic, small-volume payments through the Federal Reserve and the Clearing House.

Though you may not recognize the name, you may receive ACH transfers when your employer direct deposits your paychecks and make them when you allow automated bill payments from your bank accounts to your phone or insurance company.

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What's the difference between an ACH Transfer and a Wire Transfer?

Wire transfers are similar to ACH transfers in that they involve transferring funds from one bank to another. However, wires tend to follow different rules, timelines, and cost structures. Wires are generally used for larger, one-time transfers like during the sale of a property. ACH  payments on the other hand are more suited for recurring payments, such as your paycheck. While an ACH transfer can either "push" or "pull" money from a bank account, a wire transfer can only be used to send money.

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Benefits of ACH Transfers

While checks are still a common way to pay and get paid in the construction industry, and digital payments like wire transfers will always serve well in unique circumstances, ACH transfers are becoming a common way of doing business. For good reason – there are many distinct advantages of using ACH transfers to move money between bank accounts.

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1. Speed

ACH transfers are quick. Once they're initiated, electronic payments can be completed in anywhere from a few hours to a couple of business days.

Think about the time it takes to finalize a paper check. A check must be initiated, printed, signed, and then mailed or handed to the recipient. The recipient then needs to get the money to the bank, where some funds may be held for as long as three business days. The whole process is time-consuming and labor-intensive.

ACH transfers, while working on a slightly longer timeline than wire transfers, are fast and automatic, saving both sender and recipient time and effort, especially for recurring transactions.

Given the complexity of payment between parties on a construction job, time is essential to ensure everybody gets paid promptly. The time saved on each payment by using ACH transfers may translate into weeks by the time the money trickles all the way out to subcontractors, suppliers, and workers.

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2. Security

Check fraud is a frequent and costly concern. Research showed that in 2020, 66% of fraudulent payment activity was attributed to the use of paper checks, as fraudsters either altered legitimate checks or created false ones to scam money out of companies and institutions.

By contrast, ACH transfers through Truss offer bank-level security. Data sent between customers and applications is encrypted on electronic payments, so it's protected from prying eyes and tricky alterations. Truss's fraud detection algorithms further protect digital payments from outside influences.

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3. Lower cost

The cost of an ACH transfer is not fixed. A service provider or bank can choose the amount to charge and has the freedom to charge more for an expedited timeline, for example. Still, almost without exception, ACH is a cheaper option for transferring money than a wire or a paper check.

Each wire transfer can cost as much as $30 for the sender and $20 to the receiver for domestic wires, and credit card payments usually charge a percentage fee which can cost the recipient anywhere from 1.5-3.5% of the amount charged.

Paper checks cost the sender at every step along the way. Checks cost money to print, labor hours to prepare and obtain approvals and signatures, and postage fees to get to the recipient. Each check can cost $25-$70 when all is said and done.

Meanwhile, the median internal cost for sending an ACH transfer is $0.29.

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4. Ease of use

You can set up an ACH payment with just a little information, like the name, personal information, and bank account details you're sending to or receiving from.

Each of these reasons may be contributing to the popularity of ACH transfers – in 2018, ACH officially overtook checks as the predominant non-cash payment method in the US.

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What Information Do I Need to Initiate an ACH Transfer?

To pull money from someone's bank account using ACH, you'll need a bit of basic information from the sender.

First, personal information:

• Name
• Full mailing address
• Email address

Second, you'll need some information about the transfer that you'll be initiating:

• The dollar amount of each transfer
• How often the money should come
• The date of the first ACH payment
• How many times the ACH transfer will occur

Finally, you'll need to detail the account information the money will come from:

• Branch transit number
• The account number
• Institution ID number
• Date
• The sender's signature, authorizing the payments

Helpfully, this information is available from most online banking platforms. To ensure you have all the information possible, you can have your clients fill out an ACH form before the first payment due date.

But it gets even easier. After a quick setup with Truss, you can send and receive no-limit ACH payments through your email. You can collect payments and pay your suppliers – without fussing with all those account details. The recipient can directly log in to their online banking platform to finish the ACH payment, or choose to pay by credit card.

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Payment method matters

Because of the complex structure and the "pay when paid" system of construction payment processing, it can sometimes take nearly three months for payments to be completed. Those weeks can feel far too long for companies that are borrowing money or funding projects from personal accounts just to keep projects alive.

It's vitally important to make sure construction payments can happen quickly, easily, and with top-level security. ACH payments can make it happen. Using Truss can happen even faster because you can skip collecting personal and account details and send payment links over email to keep the money flowing.

Ready to figure out how to make construction payment processing fast and easy for your clients? Get started for free with Truss today.