How US Businesses Can Efficiently Pay Vendors Via ACH

If you’re an entrepreneur with a business in the US - or a freelancer or sole proprietor working with suppliers and contractors - you’ll need to find ways to pay your vendors conveniently. Making vendor payments by ACH (Automated Clearing House) can be efficient and cheap, offering ways to make one off and recurring payments locally, and through third party services, internationally. This guide walks through smart ways to pay vendors by ACH so you can decide if it works for you.

How to Pay Vendors Via ACH in the US (Step-by-Step)

You may be able to pay your vendors by ACH directly or through a third party service, including services which integrate with your accounting platforms. Using an ACH payment is often one of the cheapest options if you’re sending money to a vendor in the US - and thanks to third party services, ACH can also be used for efficient low cost overseas transfers, too.

The exact process you follow to pay your vendor visa ACH may depend on whether you’re paying direct or through a third party - but the steps involved are usually fairly similar. Here’s a rundown:

Step 1: Gather the required vendor information

ACH payments are deposited into your recipient's bank account directly. This is convenient, but it also means that to arrange your vendor ACH you’ll need to gather some important information. Here’s what you’re generally asked for when sending an ACH to a vendor in the US:

• The vendor’s business name as shown on their business bank account
• The vendor’s bank account number
• The vendor’s bank routing number (ABA)
• The account type - checking or savings for example

In some cases you might also need to provide the vendor’s business address and their bank's address.

If you're using a third party to send your payment to a vendor you may be able to pay via ACH for a transfer that is made to a bank overseas. In this case you might also have to provide the vendor's bank BIC/SWIFT code, which is typically needed to route payments to international banks.

Step 2: Get a completed W-9 for your tax reporting

If you have a US business and pay non-employee compensation to a vendor or contractor, you may need to report this to the Internal Revenue Service (IRS). To allow you to do this, you’ll need to get the vendor to pass you an IRS from W9 - Request for Taxpayer Identification Number and Certification¹.

If the vendor is overseas, the paperwork you need may be different. For some payments to contractors for example, you may need to ask for a W-8 BEN - Certificate of Foreign Status of Beneficial Owner for United States Tax Withholding and Reporting (Individuals²).

As tax requirements may vary depending on the nature of the payment and the services the vendor has provided you, you might choose to ask for support from your CPA (Certified Public Accountant) to check you have everything you need.

Step 3: Set up the vendor as a recipient in your payment system

Next you can start to get everything ready to make your ACH payment. If you’re paying directly from your business bank account to the recipient you can set them up as a payee in your bank’s payment system. This can often be done online or in the bank’s mobile app, allowing you to enter the vendor’s details ahead of time and then make payments in future with less admin to complete.

If you're using a third party provider you may also be able to add your vendor as a recipient in your provider account which can make the payment processes quicker and faster when it’s time to pay a bill.

Step 4: Process the payment as an ACH

Once you’re ready to pay your vendor using an ACH you can initiate the payment by logging into your bank or third party provider account. You’ll need to navigate to the payment area and set up the payment following the bank or provider’s processes.

At this point you can enter the amount to pay, the date for the payment and any message or reference to pass to the vendor. If it will be a regular transfer you can also often set this up so you don’t need to enter the details every time the payment comes due.

On the payment date the money is debited from the account or card you’ve selected and sent to the recipient using the ACH network. Some ACH payments may take a day or two to arrive, although same day ACH transfers have been increasing in popularity rapidly over the past few years³, leading to faster vendor payments.

The Benefits of Using ACH for Vendor Payments

Paying your vendors using ACH can be one of the most cost effective options available. The exact price you pay your bank depends on the account you hold, but to give an example, with the Bank of America Business Advantage Fundamentals account you can make 20 free electronic transactions monthly, including ACH payments - or up to 500 with the relationship banking service. Low per transaction fees apply after this, of 0.45 USD⁴.

Paying using an ACH usually also lets you schedule your payments in advance, including regular payments. This means there’s less chance of you missing bills by accident, making it easier to maintain strong vendor relationships.

Another benefit of ACH payments compared to other options like mailing a paper check is that it’s a secure payment method which has reliable delivery times. There's no need to worry about your check going missing in the mail, and no need for the vendor to wait while the check clears at their bank, speeding up the end to end process significantly.

ACH transfers are usually only available within the US. However, if you use a third party provider you can often pay by ACH to arrange a transfer to an overseas vendor. This may end up cheaper than using a direct international wire payment to fund your overseas vendor payments.

Choosing the Right Platform for ACH Vendor Payments

If you plan to use a third party platform to send your ACH payments you have several choices. Here are some providers which are popular with US businesses to help kickstart your research.

QuickBooks ACH

If you use QuickBooks for your business accounting you may also choose to make a QuickBooks ACH payment to your vendors using their QuickBooks Bill Pay⁵ service. This allows you to automatically reconcile payments, and set up work flow and approval processes so that bills can be appropriately checked before sign off and payment. There’s also a neat option allowing vendors to enter their own payment information directly into QuickBooks, which further reduces the admin you need to complete to initiate a payment.

Once your vendor is set up on QuickBooks you can make your payment from your own bank by ACH (or use a card, for a fee), and then choose how you want the vendor to receive their payment. If you want the vendor to get paid via ACH themselves, this will take 3 business days for a standard payment, or 4 business days if you’re paying more than 100,000 USD in one transfer. There are also other payment methods your vendor may prefer, including paper checks⁶.

BILL

BILL⁷ offers ACH payments to vendors which can be standard payments taking 2 - 5 days, or same day and next day payments⁸ if you’re in more of a hurry. There are also other payment methods if your vendor does not want to receive their money by ACH. You can still pay BILL using ACH yourself, but the money can then be passed to the vendor by check, local or international wire.

BILL fees to process a payment by ACH, assuming you pay by ACH and the money is then sent on to your recipient by ACH is 0.59 USD for a standard payment⁹. There are also expedited payment options by ACH which cost 11.99 USD, but which could have your money there on the same day, or next day, depending on the time you initiate the transfer.

Save Time and Money On Overseas Payments With Wise Business

Wise Business can help you save big time on international payments.

Wise is not a bank, but a Money Services Business (MSB) provider and a smart alternative to banks. The Wise Business account is designed with international business in mind, and makes it easy to send, hold, and manage business funds in currencies.

Signing up to Wise Business allows access to BatchTransfer which you can use to pay up to 1000 invoices in one go. This is perfect for small businesses that are managing a global team, saving a ton of time and hassle when making payments.

Some key features of Wise Business include:

• Mid-market rate: Get the mid-market exchange rate with no hidden fees on international transfers

• Global Account: Send money to countries and hold multiple currencies, all in one place. You can also get major currency account details for a one-off fee to receive overseas payments like a local

• Access to BatchTransfer: Pay up to 1000 invoices in one click. Save time, money, and stress when you make 1000 payments in one click with BatchTransfer payments. Access to BatchTransfer is free with a Wise Business account

• Auto-conversions: Don't like the current currency exchange rate? Set your desired rate, and Wise sends the transfer the moment the rate is met

• Free invoicing tool: Generate and send professional invoices

• No minimum balance requirements or monthly fees: US-based businesses can open an account for free. Learn more about fees here

Use Wise Business >>