Still waiting for that paper check to come in? You could minimize the fees you pay and the time it takes to get paid by starting to accept eCheck via direct bank to bank ACH payments from your clients. Interestingly, they are a perfect fit for the legal industry for a few reasons, most importantly because your clients already pay for everything else online but are used to sending a paper check in the mail to cover legal bills. ACH is essentially an online direct from bank payment, so most law firm clients are more comfortable paying their legal bills with ACH rather than credit card. It’s quickly becoming the main form of payment for the legal industry.
What are they?
For people unfamiliar with the industry term, ACH payments might sound scary. But they’ve actually been around since 1974. ACH payments are electronic payments made through the Automated Clearing House (ACH) network. Essentially, the ACH acts as a secure intermediary to move funds from one bank account to another. Direct deposits of wages and bill payments made directly from checking accounts are both enabled by ACH, so consumers are well familiar with the concept, if not the exact terminology. NACHA, the Electronic Payments Association behind the ACH network, states that more than 25 billion ACH payments were made in 2016.
ACH payments come in two forms: debit and credit. ACH debit transactions pull money from an account, meaning that when you authorize a payment, the payee then pulls the required amount directly from your bank account. Most recurring bill payments are set up this way. ACH credit payments push money from your account into another one, for example in the form of a direct deposit.
Why use them?
ACH payments offer benefits to both payers and payees, mostly in the form of price, speed, security, and ease of use. While ACH payments offer similar benefits to credit card payments—remote payments, payment automation, easier tracking of accounts receivable—ACH payments can provide even more advantages, particularly with fees.
Lower fees: Fees for ACH payments are generally much lower than credit card transaction fees, but the user experience of paying with ACH has traditionally been less convenient than the few clicks it takes to pay online with a credit card. Companies like Bill.com, Paypal and other ACH payment facilitators require clients to link their bank accounts, then wait 2-3 business days for microdeposits to appear in that account, then return to the platform to enter the deposit amounts and verify account ownership. The entire process can take up to a week and requires the client to take many steps in order to get set up to start making ACH payments. Hence credit cards being an easier way to accept online payment and the transaction fees being high as a result of this added convenience, generally at least 2.95% and as high as 4% of the total transaction.
But that isn’t the case anymore. Companies like Headnote see the value in making ACH payments as easy as possible for clients and consumers and have taken the time and effort to create technology that does just that. With Headnote, clients can pay direct from their bank via ACH with just a few clicks, a process as easy, seamless and secure as paying with a credit card. The entire process takes just 30 seconds and doesn’t require the client to wait for microdeposits, open a Headnote account, or take any action outside of making a few clicks to submit payment.
And the best thing for attorneys and law firms: the fees for this service are only 1.9%, an industry-low for client-friendly online payments, and the average time to get paid is only 4 days. That means that if your client pays an invoice for $1000 via ACH, you only pay $19 instead of the $30 to $40 you would need to pay if they paid via credit card.
Faster payments: ACH payments can take 1-3 business days to process. This means that the funds immediately appear in your account as “pending” until the transaction is fully processed allowing you access to the funds. Compare this to a check payment in which you might wait weeks for it to arrive, then you have to physically deposit the check at a bank, and even after all that, wait up to 5 days for the check to process and land in your account.
While ACH payments currently process within a similar time frame to credit card payments, ACH payments may soon take the advantage. NACHA is currently implementing in phases a new rule to enable same-day processing for all ACH payments, excluding international transactions and transactions exceeding $25,000. Beginning March 16, 2018, the same-day rule will enter phase 3, requiring banks qualified to accept ACH payments to make funds available to their depositors by 5:00 pm at the bank’s local time.
Security and reliability: The thought of handing over access to your bank account, which is required to enable ACH payments, can sound rather scary. ACH payments, however, are regulated by the Federal Reserve Bank and the Electronic Fund Transfer Act, and consistently rank as the safest method of payment.
The 2017 AFP Payments Fraud and Control Survey found that ACH payments are the lowest targets of fraud. Paper check payments are compromised at 55% of organizations, whereas 22% of organizations have problems with ACH payments, slightly lower even than credit card payments at 23%. (ACH credit payments ranked at the very bottom at 8% of organizations.) And, by the way, that banking info you might be nervous about handing over to enable ACH payments? It’s printed at the bottom of each and every check you write. More importantly, companies like Headnote’s proprietary ACH payment process don’t require the client to ever type their banking info, so that sensitive information is never transmitted to Headnote or anyone else.
The Electronic Fund Transfer Act offers further protection, allowing consumer 60 days to report fraudulent charges with no liability. Debit cards on the other hand, only allow 2 days to report fraud for a liability up to $50 and 60 days for up to $500 in liability.
Client friendly: Law firms that work primarily with corporate clients are likely used to accepting payment via direct deposit instead of check or credit card, so accepting payments via ACH makes total sense. Attorneys that cater to consumers, however, may not have a lot of experience accepting payment via ACH to date. But more and more attorneys are reporting that when given the options their clients, consumers or corporations, prefer to pay via ACH instead of other methods. This may not make sense at first, but the reasoning is actually quite simple and logical.
As previously mentioned, most clients pay for every service besides their legal bills online already and would prefer to pay their lawyer online as well. However, they are used to paying via check for these services. Furthermore, many business and consumers report that legal fees account for their largest bills. While they don’t have the necessary available balance available on their credit card to pay their entire legal bill, they do have the funds available in their bank account. Based on all of these factors, ACH is gaining popularity as a major form of payment in the legal industry and is an extremely client friendly way to allow your firm’s customers to pay online.
How to get started
The easiest way to start accepting ACH payments from your clients is through legal accounting software, such as Headnote. Using Headnote, you can send an e-invoice to a client and start accepting online payment via ACH the same day. Signing up for a Headnote account only takes a few minutes (one of their other core differentiators from their competitors) and is totally risk-free: all new members get a free 30-day membership to give the service a try and see if it’s right for their firm. Headnote’s Customer Support team is always available to help you get started, and their Data Migration team can help transfer data from any other source, so getting up and running is extremely easy especially for solo attorneys, small and medium firms.
Once you consider the overall benefits of ACH payments, it’s hard to say no to them. They’re faster, safer, trackable, less expensive, and make payments easier for your clients to manage.
For more information on how to start accepting ACH payments using Headnote, take a look at the FAQ section regarding payments or register for a free trial and start using the product to see if it’s right for your firm. You can also live chat Headnote’s Customer Support team 24/7 from their website, email firstname.lastname@example.org, or call 888.384.3236 to speak with a representative.