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ACH vs Wire Transfers For Domestic Payments

Which do you prefer? ACH or Wire and why?

Answers

Sara Voight
Title: Controller
Company: Critical Signal Technologies, Inc
(Controller, Critical Signal Technologies, Inc) |

ACH - besides the fact that it is significantly cheaper, it also allows us to implement and maintain better controls. A wire goes out same day, and usually results in people running around to get the funds out by 3:30pm. An ACH batch has a better chance of being created and truly reviewed by a second party before being released. We operate with virtual folders, so the approver doesn't receive a hard copy folder with all the invoices attached. They get a link with all invoices and the PDF ACH requests and approvals which can be used for our audits as well.

Ernie Humphrey CTP
Title: CEO & COO
Company: Treasury Careers
LinkedIn Profile
(CEO & COO, Treasury Careers) |

I would not agree that an ACH has a better chance of being reviewed by a second party. Most ERPs process all electronic payments in batches. Also, a "wire" (Fedwire) allows more detail for cash application by the company being paid, the payer can track the wire (this is critical for high dollars, critical transactions (completing an M&A transaction)), but wires are much more expensive.

Topic Expert
Scott MacDonald
Title: President/Owner
Company: AlphaMac Resources, Inc.
(President/Owner, AlphaMac Resources, Inc.) |

Each serves a purpose and each has pulses and minuses. So to pick which I prefer, it would depend on the type of payment, how quickly the money had to move, whether cost justified the payment method, etc. For example, paying a $25 wire fee for a $50 payment is not cost beneficial.

I typically recommend wires only for large dollar, time sensitive payments. Everything else is an ACH or check.

Another option is cash back credit cards. If your vendor accepts credit card payments, look into a cash back credit card to use for payment.

Elisabeth Bagdiul
Title: Consultant
Company: None
(Consultant, None) |

It is very interesting subject and I think very much on top in digitalized world.

From my point of view - both ACH and Wire make sense to the business considering cost element and especially or primarily level of controls not only on the level of payment process but downstream processes, as by the end of the day what is core is to ensure that the recipient of the money is the one who delivered goods or service. Process dependent -> sometimes charges for wire may be accepted even if they are set above average price for wire but especially in the cases when the only means of payment control execution is substantial risk transfer to the bank [verification stage]. Cost of appropriate process controls vs. cost of control execution transfer to financial institution.

Chris Shumate
Title: Accounting Manager
Company: Dominion Development Group, LLC
LinkedIn Profile
(Accounting Manager, Dominion Development Group, LLC) |

Wayne – My answer is that it depends. If I am a customer receiving the payment, I want a wire. As Sara Voight points out it goes out of the vendor’s bank and directly into mine. I work for a construction general contractor. Money being received from our largest clients is not a few thousand, or even hundreds of thousands of dollars. So receiving these payments immediately is vital to the company’s health. If I am on the receiving end, I want a wire.

If I am paying someone for services they rendered, I prefer the ACH method. Because ACH payments are batched and sent out together it makes them more desirable to be sent that way from our viewpoint. If we are waiting on a lien waiver, certified payroll, or anything else, we can generate the ACH much like a check, then hold the ACH and not submit it until we receive back the required documentation from our subcontractors. We couldn’t hold payment for a wire without extra effort like we can for an ACH.

I agree with Scott MacDonald’s cost justification statement too. That would be my only caveat.

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