What is ACH Payment?

Definition

ACH Payment is an electronic funds transfer processed through the Automated Clearing House (ACH) network, allowing organizations to transfer money directly between bank accounts. ACH payments are commonly used for payroll, vendor payments, and recurring billing due to their efficiency, security, and low transaction costs.

Key Features

• Automated Transfers: ACH enables streamlined processing through Payment Automation (Treasury) and reduces reliance on paper checks.

• Authorization and Controls: Transactions require Vendor Payment Authorization and are governed by Payment Verification Control processes to ensure accuracy and compliance.

• Segregation of Duties: Payment Segregation of Duties ensures different personnel handle initiation, approval, and posting of payments to mitigate fraud risk.

• Integration: ACH works with Payment Gateway Integration and Payment Approval Automation systems to streamline workflows and reduce manual intervention.

• Financial Strategies: ACH payments support Early Payment Discount Strategy and Early Payment Discount Policy initiatives, while also providing data for Customer Payment Behavior Analysis and monitoring Payment Failure Rate (O2C) or Payment Failure Rate (AR).

Benefits

ACH payments offer lower transaction fees compared to wire transfers, faster processing times than checks, and enhanced traceability for audit purposes. They also support compliance with accounting standards, such as Share-Based Payment (ASC 718 / IFRS 2), when handling vendor-related settlements involving equity-based compensation.

Summary

An ACH Payment is an electronic bank-to-bank transfer via the ACH network that enhances payment efficiency, reduces risk, and supports treasury automation. Combined with governance, controls, and integration, ACH ensures secure, accurate, and auditable financial transactions.