The benefits of EFT

One of the best cash management tools available to businesses is electronic funds transfer, or EFT. As the name implies, EFTs enable businesses and their customers to exchange money between each other electronically instead of via checks or wire transfers. EFTs are also sometimes referred to as ACH transactions. ACH stands for Automated Clearing House, which is the nationwide electronic payment network that allows the actual clearing of electronic payments and payment-related information between financial institutions. Payment-related information can be sent along with ACH transactions, a process known as electronic data interchange, or EDI. While you may not have heard the term ACH, you may be familiar with some of the different kinds of electronic payments that can be initiated through the ACH network. These include the following: Direct deposit: This is perhaps the most common type of ACH payment. Most companies in the United States today pay their employees via direct deposit instead of paper check. Direct deposit is also used by government entities to make Social Security and other benefit payments and to issue refunds to taxpayers. Direct debits and credits: These types of electronic payments can be made from business-to-consumer and from business-to-business. Consumers pay many recurring bills, such as mortgages, utilities, insurance, and health club memberships, via ACH, and many businesses pay their vendors and suppliers via ACH credits instead of paper checks. Federal, state, and local taxes: ACH has become a common funds transfer mechanism for the payment of corporate taxes at all levels of government.

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