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7 Ways to Prevent ACH Returns

Payments • January 7

The Automated Clearing House (ACH) system that exists in the U.S. handles all electronic transfers between financial institutions, from direct deposits to insurance payments to Social Security benefits, and much more. Unfortunately, ACH payments occasionally get returned to the sender when the receiving institution cannot be reached or does not want to accept the payment (for instance, if there are insufficient funds in the recipient’s account). By avoiding these seven circumstances, you can prevent ACH returns and ensure your transactions go through smoothly.

1) Request Faster Payments

When receiving payments via ACH, request faster payments when possible. Many banks offer free same-day or next-day payment transfers if you give them enough advanced notice. Requesting faster payments might save you thousands of dollars in unnecessary expenses by keeping your cash flowing efficiently. Keep in mind that some businesses may not have time to wait for payment, so talk with them before making a change like this; they may need their funds on time and could reject transactions that arrive too late. Most banks allow customers to make next-day requests online—if yours doesn’t, try calling customer service and politely requesting faster transfers for all of your accounts; it never hurts to ask! Even if your bank can’t process requests instantly, there are steps you can take to help ensure timely payments. For example, keep your balance low relative to how much money is coming in at any given time (less than 10 percent of gross receipts is a good rule of thumb). If multiple checks come through at once or one person owes you several thousand dollars (or more), those funds will leave immediately and without exception. So, while waiting three days isn’t ideal for many industries, fast access to hundreds of thousands is critical for others.

2) Set Up a Recurring Deposit Program

One of the best ways to prevent an ACH return is by setting up a recurring deposit program with your customers. Recurring deposits allow you to collect a set amount of money on specific dates, such as quarterly or monthly. This program protects both parties—it allows your customer peace of mind knowing that payments will come in on time and it gives you financial security knowing your business has built-in cash flow every month. The most important part of establishing a successful recurring deposit program is communication: let your customers know how much they need to contribute each period, when payments are due, and remind them if they forget to make their payment. By being proactive about communicating with clients, you can avoid overcharging fees and lost revenue due to late fees; essentially, you could prevent an ACH return altogether!

3) Use Real-time Payment Methods

Because of its instantaneous nature, it’s easy for payment processors like Payliance with Real-time Payment processing solutions to verify whether a transaction is valid and will clear successfully. If you’re selling something online, consider using one of these methods when collecting funds because they help prevent chargebacks and they do away with traditional checks and paperwork. They also offer fraud protection that can be extremely useful if someone decides to use a stolen credit card or another form of fraudulent documentation to make purchases. Using services like those offered by Payliance (which processes transactions for companies such as MoneyLion and Covered Credit) makes it very difficult for scammers to get their hands on your money, even after receiving confirmation from your bank that funds have been deposited into your account.

4) Verify Customer Contact Information

Take a moment to verify your customer’s contact information is correct. Any missing or incorrect information, such as a name misspelling or invalid address, can lead to returned checks and delayed payments. If you do receive a returned check from one of your customers, try calling them first. It might just be a simple error! If that doesn’t work, send a letter via snail mail letting them know what action needs to be taken for payment processing. Remember: Do not simply re-deposit their check; if you do so, you will likely get hit with NSF fees. Instead, process their payment manually when they reply to your letter with updated information (if necessary). For more info on why these fees occur in the first place, see our blogs on credit card fraud prevention and avoiding bounced checks.

5) Keep Transaction Logs

If you make a mistake, it’s important that you know exactly how much money went out of your account and when. Just because things didn’t go as planned doesn’t mean you can’t recover—you might just need to take a few extra steps. Keeping clean records of all transactions (especially if they are electronic) will help you in case something goes wrong. These records should be proof positive of what happened and who was involved. In most cases, you should be able to get your bank or payment service provider to give you a paper trail on what transpired. These days, these services store copies on their servers for at least six months; after that time has passed, there isn’t much more anyone can do for you so keeping good records is key! The same applies if checks were involved: have them cashed immediately then put them in a safe place.

6) Prepare for Seasonal Business Fluctuations

If you have a seasonal business, chances are there will be months that are busy and others that are slow. As your business becomes busier, you may find it challenging to keep on top of routine tasks during peak times. By preparing for these fluctuations in volume, you can ensure that your business continues running smoothly even when it is most hectic. In essence, you’re taking steps to prevent an ACH return before one ever occurs. That way, if an unexpected rush does occur, you won’t miss out on sales because of delayed payments. Here are some ways to prepare your business to handle any influx of revenue with ease: Work with third-party vendors: If your cash flow ever dips below zero, you want as few gaps between orders and delivery dates as possible. Work with a company like Payliance that handles all ACH returns on behalf of its clients; doing so ensures faster turnaround time from shipment to payment.

7) Educate Your Customers

It’s a good idea to educate your customers about electronic payments. Before they make a purchase, be sure they know how electronic payments work and what their rights are when it comes to reversing transactions. This way, if something goes wrong with their order, they will have a better idea of how (and whether) they can get their money back. They’ll also feel more confident paying via e-check or ACH in general, which will lead to fewer returns and lower service costs down the road.

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