7 ACH Processing Mistakes That You Should Avoid

Automatic clearing house (ACH) payments can be a convenient way of transferring funds electronically. However, their convenience does not mean they are entirely foolproof. Just like any other electronic payment, you run the risk of encountering fraud. Furthermore, a few simple mistakes can mean you will pay way more than you should be paying. If you want to avoid these pitfalls, make sure you are not making these mistakes during your ACH transfers.

Skipping the Notification Before Debiting Customers

If you’re a business that uses ACH to bill customers every quarter or every year, a notification can make things go a lot smoother. The problem with not notifying customers is that they can easily forget about your payment arrangement. When they see a random debit show up in their account, they may assume they did not authorize the transaction and block the payment from their bank. This means you will have to spend a lot of time and energy arguing to get your payment.
Just sending out a quick reminder beforehand can stop this common ACH issue from arising. Emails are a popular method for notifying customers, but texts can be even more effective. This helps remind businesses that you will be debiting them soon, so they can go ahead and prepare for the upcoming transfer.
Skipping the Notification Before Debiting Customers

Just Going With the Cheapest ACH Processing Service

When picking their processing service, many businesses make the mistake of just choosing whoever has the lowest price. This can actually end up costing you a lot of money in the long run. The issue is that some processors have hidden fees, limited funds availability, or a lack of tech support. If you do not pick the best service for your needs, you could end up with a lot of unexpected expenses and frustrating delays. 
Furthermore, some of the cheaper processors skip basic security considerations. One of the most common ways that businesses get compromised is by a scammer hacking into their third-party ACH processor. Even if you are not hacked, you can end up with big fees and fines for not complying with PCI standards.
Ultimately, if you want to save money and have your processing go smoothly, you need to do your research. Actually, see how various processing services work instead of going with the first one to give you a low quote.

Not Staying Up to Date on the Rules

The ACH transferring system is closely monitored by various organizations. To protect both businesses and consumers, NACHA has established an extensive set of rules for how ACH transfers work. Though any good ACH processing company will be aware of and follow these rules, it is still essential to keep up to date.
The NACHA regulations and guidelines are constantly changing. For example, a major change recently was reducing the threshold for returns. Previously, NACHA allowed unauthorized returns for up to 1% of the total transaction number. Now, the threshold is just 0.5%. If companies are not aware of these changes, they can end up triggering a frustrating inquiry and racking up potential fines. 

Forgetting to Use Bank Account Verification

A surprisingly high number of businesses make the mistake of assuming that everything is fine as long as their ACH processing looks official. However, when you ignore the account-verification process, you can end up with a major hassle. You should never start delivering goods or services until you can actually verify your ACH payment through your bank. Making this mistake can often lead to losing huge amounts of money.
Taking the time to verify an ACH payment is actually quite simple. Usually, all you need to do is go to the financial institution that holds the account and verify through that institution. Depending on the ACH company you select, this can even be an automatic part of accepting any payments. With proper ACH automation and account verification, you can make sure all your accounts are legitimate.

Not Being Aware of Common ACH Fraud Methods

ACH is one of the most secure ways of sending money electronically, but this does not mean that it is entirely foolproof. Like any other financial transaction, there are always ways for scammers to take advantage of a company. The best way to defend against fraud is simply being aware of it. This helps you recognize potential fraud and stop it in its tracks.
One of the most common fraud methods is scammers sending emails or texts that try to trick you into revealing sensitive information. Always make sure you are communicating with your actual business partners and ACH transfer service through verified communication channels. Another popular method scammers use is hacking computers, so you must prepare with antivirus and malware programs. Remember that there is always a risk of an involved party behaving unethically, so you need to regularly review transactions for suspicious behavior.
Not Being Aware of Common ACH Fraud Methods

Relying on ACH Returns to Handle Accounting Mistakes

When you are part of a busy company, taking the time to double- and triple-check every number can get frustrating. However annoying it may be, skipping proper verification is a bad idea. There are all sorts of simple administrative errors, like transposed numbers, that can lead to a problem with your ACH transfer. Of course, one of the perks of using ACH is that you can request a return when you make mistakes. However, these still contribute to your returned transaction rate, so they can count against you.
Therefore, it is essential that you still follow good accounting practices. Do not rely on ACH to fix everything that goes wrong. Instead, you still need to take the time to double-check payments and perform internal audits. Even if you have ACH automation, it is a good idea to manually review your payment system every now and then.

Not Keeping Transaction Records for Later Examination

Once your ACH payment goes through, you probably do not plan on ever thinking about it again. However, old ACH payments actually need examining frequently. It is very common for merchants and regulating bodies to request prior authorizations for an ACH transfer. If you do not have them, you can end up paying fines or getting into trouble. Many companies forget to hang onto these records, or they archive them in a way that is not easily searchable.
This problem is fairly easy to solve. All you need to do is set up proper proof of authorization storage methods. After each transaction, you should archive your authorizations in a place where individual authorizations can be easily located and retrieved. This will save you a lot of time in the future and keep you from running into problems.
So, have you ever done any of these things before? If you want to avoid making any big mistakes while processing ACH payments, we can help. Checkissuing.com provides an easy and reliable way of getting your payments to the right people. To learn more about our services, get in touch with us today.