1. What is an EFT?
2. How long do EFT payments take?
3. ACH vs. EFT
4.  How to set up EFT payments

Running a business involves the organization and completion of hundreds of tasks. These tasks are totally different for every business and heavily depend on industry and business model. For every business, at least one task is the same: making payments. Paying vendors, paying bills, paying for inventory–every business makes payments. Where in the past payments were primarily made in one of two ways, cash or check, in today’s modern business world, more and more payments are being made using EFT payments. 

What is an EFT?

An EFT–or electronic funds payment–is actually an umbrella term for the fast, convenient, secure method of paying using electronic funds. Other forms of EFTs include, but aren’t limited to: ACH transfers, wire transfers, direct deposit, credit and, debits cards–really any form of payment where funds move from one banking account to another electronically. 

Any payment method that involves the transfer of funds between banking accounts–savings, checking, business, etc.–falls under the EFT payments definition. These accounts can be within the same financial institution or between two different financial institutions. Regardless, the transfer of funds made when making payments via EFT is always made electronically. An EFT is not a specific form of payment, but rather a term that encompasses any and all payments involving an electronic transfer between two accounts. 

How long do EFT payments take?

EFT payments are increasingly popular because they are, by most accounts, settled by the next business day. Though this can change depending on if your EFT is an international payment, if the payment you’re making is over $25,000 dollars, or if the date that you’re attempting to make the payment is a bank holiday or a weekend day. Any of these variables can add time to the processing of the EFT payment.

What is the difference between ACH and EFT payments?

There really isn’t any real difference between EFT/ACH payments. While an EFT is an umbrella term for any transfer of money that occurs electronically between two bank accounts, an ACH on the other hand is a specific payment method that occurs between two financial institutions and is processed through the Automated Clearing House and regulated by Nacha. There isn’t a difference so much as there is a focus on specificity. 

Benefits of EFT Payments

• Ease of Use

There are many different types of EFT payments–ACH transfers, wire transfers, direct deposit, credit and, debits cards, etc.–and this broad range of options means accepting EFT payments and making payments via EFT is widely accepted and in most places, easy to use. 

• Speed

EFT payments are usually–with some exceptions–processed the same day as they are made. This means if a small business is trying to make a payment quickly, most EFTs are a good option.

• Security

Making payments via EFTs involves less security risk than say paying with cash or by paper check. Because the entirety of the process is done electronically, the risk of losing the check or the cash or having either stolen is far less. That said, there are security risks associated with EFTs and these should be acknowledged when deciding whether or not to accept and/or pay with EFTs.

• Time

EFTs help cut back on the time spent manually, because they allow a business to automate payments and eliminate the supplies used in paying by or accepting paper checks. This time can then be spent on other tasks associated with running a business.

Benefits of ACH Payments

• Low cost

Compared to credit card processing and paper checks, ACH payments are remarkably inexpensive. Credit card processing fees can be based on a percentage of the purchase and though paper checks are low cost in terms of processing, the additional expense associated with supplies and labor to process them quickly adds up.

• Security

As ACHs are EFTs, the security risk is much lower than traditional means of payment. Like all payments via EFT, ACHs are processed electronically so there’s no risk of losing a paper check and/or having the check stolen or tampered with. Paying via ACH also removes many of the steps–and many of the intermediaries needed for these steps to be taken–and by doing so, eliminates opportunities for security issues to arise.

• Ease of use

ACHs–like all payments via EFT–make paying easier for businesses and for their customers by removing the hassles of non-electronic payments. With ACHs there are no checks to deal with, no trips to the bank, and no paper invoices.

• A preferred type of payment

In a 2019 Federal Reserves Study, the usage of paper checks as a form of payment in transactions had declined by almost 20 billion since 2018. On the other hand, the usage of ACH payments had risen by 6%, meaning that checks are steadily becoming passe as ACH and other forms of EFT payments are quickly becoming the norm.

How to Setup EFT Payments

Though paying and getting payments via EFT is easy, secure, and entirely convenient, there is still a process to ensure that you are able to do so. Here’s a step-by-step guide to how to set up EFT payments with your customers.

Step 1: Complete an online form that has all the details of the payment you’re either collecting or receiving.

Step 2: Wait for the payment to be verified. If there are issues with your payment, you will be notified within one business day.

Step 3: When the payment has been verified, you’ll receive an email.

Step 4: The transaction information will be transferred to your bank.

Step 5: Funds will be detracted/added to your accounts.

Step 6: All of the details of the payment when then be available through your bank account and billing statement, giving you a record of what you paid and/or what you were paid.

Payments via EFT are more and more popular each and every day. Knowing the benefits of EFT payments and how to go about setting them up is crucial for businesses of all types.