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Why you should be taking ACH payments if you’re an MSP

Jun 10, 2015

You would think that in the world of IT and MSPs, the affordability and ease of transferring funds via electronic check would make this method of payment extremely attractive. Surprisingly, ACH payments are greatly underutilized in the IT world – with most customers paying for services by paper check or credit card.

Certainly, paper checks and credit cards do offer some advantages, but both have serious drawbacks as well. And while ACH is not a perfect solution either, most MSPs would benefit by making it a more prominent player in their payment arsenal.

Credit cards and paper checks have played a major role in most people’s lives for years, but the world of ACH remains less familiar. The most common experience many of us have with ACH is through direct deposit of our monthly salary by an employer. But as a business owner, our understanding of how ACH works is less clear.

ACH in a Nutshell:

What it is– ACH stands for Automated Clearing House transaction. It is the process of moving funds electronically from one bank account to another through a unique routing number.

How it works– ACH transaction delivers a request to debit a certain dollar amount from you customer’s bank account and credit it to your business account electronically.

 

ACH vs. Credit Card

If most of your IT customers are paying for their services by credit card, you may be leaving a great deal of money on the table. In the world of credit card transactions, a 3% fee per transaction is a very competitive rate – and one that many MSPs would be happy to have.

“The way that we run credit cards in the MSP/IT community is never as a face-to-face swipe. It’s always what’s called a “keyed in” transaction,” explained Ryan Goodman, president of ConnectBooster. “I’ve seen many examples where people are paying up to 4% to 5% to run a credit card. And, even if you’re lucky enough to get a 3% rate, that still means losing 3% of your gross total on each transaction.”

Accepting ACH in Your Business

In order to automate your payments using ACH, you will need the help of a payment processing solution like ConnectBooster. And, although you will pay a monthly service fee for the software (around $200/month for ConnectBooster), you will only be charged a flat $0.35/per transaction of any size. Compare that to what credit card companies are charging, and ACH becomes an even more attractive payment option for MSP companies.

“Consider if you are accepting a credit card payment of $5,000 from a customer,” said Goodman. “Take that times 3%, and you’re already looking at a hefty fee. On the flip side, if you are getting paid through ACH, you can run that same $5,000 transaction for a flat 35 cents. Even if you increase that transaction to $15,000, your ACH fee remains a flat 35 cents, whereas if you’re being paid by credit card, your transaction fee would be tripled.”

One of the biggest complaints most companies have about ACH is that the process is archaic and slow. However, even that has changed now that the NACHA – The Electronic Payments Association® has voted to approve Same Day ACH. This amendment to the ACH rules will make this payment method more attractive for MSPs who want to move their money faster.

Coming Up:

Stay tuned for part two in our educational series on ACH, where we’ll talk more about the benefits of ACH including how it compares to other payment methods, such as paper checks.

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