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Giving Vendors Access to Pull ACH payments- Good Idea?

Paying Vendors With ACH vs Business CheckI've noticed more and more vendors who "require" that we pay them by credit card or ACH payment, in which we are required to give our bank account information for them to pull the ACH for payment.

Does anyone else have an issue with this or am I unreasonable in giving vendors this ability to pull funds anytime they want?  How do we control situations like this a little more?  How do I approach the vendor with suggesting we pay them by check?


(Agent, JKS Solutions, Inc.) |

For perspective, did you know in the EU no one writes checks anymore? Payment by ACH and credit card and by other electronic means is a trend that will continue to grow.

Contact your banking institution and ask them for a summary of best practices. One or two of those best practices is to obtain written consent from the entity you are 'pulling' from, in fact that might even be a legal requirement.

Someone in Treasury should answer your question for the best support, but thinking those vendors will just pull funds willy nilly or invade your accounts without permission is a tad unreasonable in this day and age.

The downside of continuing to manage cash via the old check clearing delays is that you won't get the optimal pricing. The trade off is lower discounts and higher prices. So if you do comply with their request to fund electronically, find out what's in it for you on the upside -- higher discounts, lower pricing, and possibly better terms overall.

Everything is negotiable, so have a chat with your CFO.

(Assistant Controller) |

Thanks for the suggestion. I'm not so much worried about them pulling funds willy nilly, but errors and disputes over invoices do occur, and it makes situations more difficult to sort out when vendors already have your cash.

Sarah Jackson
Title: Associate Editor
Company: Proformative
(Associate Editor, Proformative) |

Hi Anonymous,

After you read the great answers on this page, take a look at this free white paper:

"Accounts Payable: Embracing The Strategic Evolution"

It has some interesting diagrams of and info on processes and alternatives, including ACH.

Topic Expert
Regis Quirin
Title: Director of Finance
Company: Gibney Anthony & Flaherty LLP
LinkedIn Profile
(Director of Finance, Gibney Anthony & Flaherty LLP) |

ACH is common and some banks offer great safeguards, but that does not make you feel any better. What I recommend is a little bit of a hassle, but should give some piece of mind. Open a separate account for your ACH vendors and fund it with two months of payments. Replenish the account monthly and always leave the cushion. At least with this approach, your risk of loss/debit error is minimized.

Topic Expert
Barrett Peterson
Title: Manager, Accounting Standards,
Company: TTX
(Manager, Accounting Standards,, TTX) |

Ask your bank about "positive pay" possibilities. Pay them by ACH, rather than a draw, if possible. Require indemnification/penalty for errors and associated costs.

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

Great question, when I used to work in Treasury we had some sort of ACH debit block on all of our accounts. I believe some banks offer ACH debit blocks that are customizable were you can specify exceptions, frequency and amount of ACH debits allowed. Regis offers a very solid suggestion as well.

Also, if you are thinking "credit card" , then you might consider a corporate purchase card programs as they can offer you rebates if you "play them right".

(Assistant Controller) |

Thanks for tip on customizing debit blocks.

Topic Expert
Linda Wright
Title: Consultant
Company: Wright Consulting
(Consultant, Wright Consulting) |

Positive pay and staff to monitor the amounts under a procurement contract will make this method of settlement work very well. As a former large corporate treasurer, I encountered no issues with this method which saves cost, adds to the efficacy of your cash forecasting and improves vendor relations.

Winston Dimaano
Title: Assistant Controller
Company: Appdynamics
(Assistant Controller, Appdynamics) |

I appreciate the perspective, thanks.

Topic Expert
Patrick Dunne
Title: Chief Financial Officer
Company: Milk Source
(Chief Financial Officer, Milk Source) |

I would not be a fan of allowing someone to pulling cash from you through an ACH, unless it’s for purchases where there would be no disputes. There are a number of programs where you can use a purchasing card which would help your working capital and at the same time help the vendor get their cash sooner. This would put the more of the burden on the seller for fees and you still have an avenue for disputes. We have experienced more and more large companies using this practice.

Title: Accountant
(Accountant, SELF EMPLOYEED) |

Our company only allows them for certain payments that are debited periodically AND same amounts. Such as insurance payments, etc. If they are for one-time invoice or variable amounts, we don't allow our vendor to pull ACH from our account.

But sometimes WE iniciate payments by requesting them their bank information.
This ACH payment (iniciated by us) is good for any urgent payment and let us save money because we no longer have to overnight checks to our vendor.

Jim Hutto
Title: President & COO
Company: Santee Solutions
(President & COO, Santee Solutions) |

ACH should NOT be a pull from a vendor. ACH should be a push from you to a vendor via an ACH partner who knows how to protect you. Even then you can transfer funds to a separate ACH account or directly to ACH partner account to avoid giving access to your account. Moving from checks to electronic payments can be a little frustrating & intimidating, but in reality ACH can be much easier to control, have less fraud exposure, reduce the cost of payments and increase efficiency in AP.

I've been in the payments industry for 21 years and consult major organizations daily on best practices for electronic payments. It is rare to find a corporation with all the correct pieces in place to maximize the use of ACH and take full advantage. Until recently the “on-boarding” of vendors, being in compliance with Know Your Customer & Anti Money Laundering Laws, and the risk of fraud due to lack of controls and the exposure of losing vendor bank account information have been huge barriers to scaling ACH beyond a few key vendors. There is huge potential for cost savings and increases in efficiency &rebates that can make big impacts on profits.

There are ACH payment models for large organizations that remove the barriers to expand ACH to as much as 80% of AP spend with no cost to the payer. Payers do not need to bear the burden of on-boarding vendors, being in compliance, or assume additional risk. In many cases all savings can go to the payer’s bottom-line and vendor rebates can be maximized which can make a significant impact on profits.

Lastly there is a lot of hype on e-payables based on commercial card products that also include ACH. Banks enjoy the short term spike of card fees, but payers must live with additional work including dealing with the vendors who realize after a large transaction that the credit card fees are not acceptable. Gave you more than you wanted but hope this helps.

Robert Honeyman
Title: CFO
Company: Advanced Predictive Analytics
(CFO, Advanced Predictive Analytics) |

bingo! the only organization that needs to pull funds is your third-party payroll service provider. all others get paid when, what, and how much you decide to pay.

Sue Ashe
Title: President and CEO MobileAccountantAZ
Company: MobileAccountantAZ
LinkedIn Profile
(President and CEO MobileAccountantAZ, MobileAccountantAZ) |

@Robert: I disagree that only payroll providers should have the ACH capability. While I would never let a regular ongoing AP vendor to pull funds whenever they felt like it I would allow (and do allow) places like insurance and LinkedIn, Sirius - etc - recurring and ongoing debits are all ok as long as my clients agree to letting me set it all up. For AP vendors I will do the ACH billpay or transfers myself so I have more control over what is being paid and making sure that all of the applicable credits are being taken and applied to payments

mark savitskie
Title: cfo
Company: marketplace homes
(cfo, marketplace homes) |

Paying a vendor by allowing a "pull" is an efficient way for both parties to transfer money. Banking regulations give you the ability to reverse any ACH pull that you deem is wrong...virtually no questions asked. This opportunity is available for some number of days 60?90? and reduces your risk considerably.

Ted Monohon
Title: VP -Finance / Controller
Company: Fantex
(VP -Finance / Controller, Fantex) |

ACH (NACHA) rules allow you dispute the transaction in a similar fashion to disputing a credit card payment however significantly different time frames. For most commercial account ACH debits, there is a two-day deadline for getting the item back to the ODFI. If the transaction is unauthorized, you have longer, however, proving that the transaction is "unauthorized" in a debit pull situation is probably diffcult when you have signed the authorization to have the pull completed.

Check with your bank on your ability to dispute and the agreement with your vendor on whether you have "authorized" the pull by simply signing the agreement.

Topic Expert
Brenda Goudey
Title: CFO/VP of Finance
Company: KDR Designer Showrooms
(CFO/VP of Finance, KDR Designer Showrooms) |

I have the same philosophy as Teresa, the only vendors who get to pull funds are those with regular monthly payments for a fixed price, like insurance premiums. We initiate the ACH payments for other vendors. While everyone is correct that there are options to dispute transactions, that's a hassle so not feasible to do in the normal course of business when you're just talking about withholding payment on a specific invoice while a problem is resolved.

Topic Expert
Christie Jahn
Title: CFO
Company: Prime Investments & Development
(CFO, Prime Investments & Development) |

I think most people have answered this but we use what's called ACH Monitor through our bank, sounds like what others have mentioned; but I initially gave my bank an approved list of ACH vendors (typically our lease payments and utility companies). With this list I had to give them an approved amount. Any time a vendor is requesting to withdraw more than my approved amount, I get a notice and have to approve the ACH or it will kick back to the vendor. This also works really well with new accounts. My Accounting Assistant will set up new accounts to be paid via ACH and I always have to approve them. I love this feature; it keeps my hand in it.

We also have a corp. credit card that is used for vendors who require a credit card, you mentioned this as an option and with credit cards, at least you do have the opportunity to dispute it if you disagree with the amount or can't get appropriate resolution from the vendor. I would hope if you are dealing with reputable companies it shouldn't be an issue.

Good luck - just remember to ensure you have some sort of check and balance and safeguard in place and you should be fine.

(Assistant Controller) |

Thanks for the great solution tip.

Topic Expert
Wayne Spivak
Title: President & CFO
LinkedIn Profile
(President & CFO, |

I like the arrangement I had with the IRS. Pull the money when I initiated the transfer, not before and not for a different amount.

I am in the midst of contacting vendors who provide services that were disrupted by Sandy and charging the same amount. I don't think so, and those who have our credit card now give me an additional work load.

Only in this country do we pay for ACH/Wire and get checking for pennies...

Debra Thompson
Title: Contract Consultant for Small to Medium ..
Company: Debra L Thompson, CPA, LLC,
(Contract Consultant for Small to Medium size organizations, Debra L Thompson, CPA, LLC, ) |

I agree with all that say that you should push money to your vendors instead of having them pull. I am just curious if your organization has no cash flow issues. If there is any then having a vendor pull is not a good idea. Negotiations with a vendor will depend if it is a vendor that is your sole sourse of a product or not. Or if they give you such a great discount then you may want to consider it. I would be making your decision not as a policy but on a vendor by vendor situation. For example if you are only talking about 3 vendors and they are going to give you a 15% price break and you need their material for you production then I would say yes. But I would limit the number of vendors you would allow. If you receive no price break and you can obtain the product anywere at about the same price then I would say no. I would just ACH that vendor or send a check. If the vendor does not like it then you have other alternatives and you can tell them that. Keeping control of your cash is critical. In Europe they do pay more via ACH but they push the ACH's and pulling is not always allowed. Also when you allow someone to pull the money you will still have to process that transaction and match it up to what they are paying themselfs and this can be time consumings. If you push the money most accounting software is designed to attach to the a/p transaction and mark it as paid.

Topic Expert
Keith Perry
Title: Consulting CFO and Business Operations A..
Company: Growth Accelerator
(Consulting CFO and Business Operations Advisor, Growth Accelerator) |

Echoing; summarizing some of the stuff above, and adding a few war stories:
-ACH is pretty archaic. Not as archaic as paper checks (for which we are dramatically behind the developed world), but to Regis's point and others, unless it is a trusted, repeated payment that you are sure is funded, then make sure it is positive pay from a separate account (or both). Additionally ask for indemnification, etc.
The flip-side of ACH from the vendor's point of view is it is a direct line into the customer account. It makes getting paid *very easy*. In fact, once you have gotten an ACH transfer from someone, you may realize that you never want to permit it again.
-Credit cards. Complaints about fees notwithstanding, these can turn out similar to ACH. For one-time transactions they make sense; I wouldn't permit a blanket, however. I've had vendors fraudulently re-use a credit card authorization. Yes, you have recourse, but *maybe* they assumed this was the correct method? Bad blood ensues.

That being said, the paper check is archaic, the wire is often expensive, so ACH can be a good tool if used properly.

Topic Expert
Keith Perry
Title: Consulting CFO and Business Operations A..
Company: Growth Accelerator
(Consulting CFO and Business Operations Advisor, Growth Accelerator) |


Can you share with us your bank that carries ACH Monitor?



Topic Expert
Wayne Spivak
Title: President & CFO
LinkedIn Profile
(President & CFO, |

Given that almost all of us agree that checks are so passe, why do we permit the banks to charge many times outrageous amounts for wires/ACH?

Their actual costs are minimal, since no human touches the the wire (especially if one uses on-line systems to initiate the wire/ACH.

As it has been said, we are the only country still reliant on the paper check. In fact, if you wish to punish a European supplier, send them a check and watch them scramble.

We use SWIFT, ABA and account numbers. Europe uses an IBAN which, while long (nothing beats the length of a Russian account number) there is no scramble to find the ABA or SWIFT code.

We are sometimes the most anti-progressive country on this planet.

Roxanne Orticke
Title: Senior Director of Finance
Company: NACHA
(Senior Director of Finance, NACHA) |

Double check the fee structure of ACH vs Wire....
ACH is multiples-lower than wire. Banks typically charge less than $1 for ACH, where wires are expensive.
Also look in to IAT instead of international Wire.

Roxanne Orticke
Title: Senior Director of Finance
Company: NACHA
(Senior Director of Finance, NACHA) |

Debit Blocks and UPIC Accounts (masked accounts) are the best route to protecting your commercial accounts against fraudulent activity.
NACHA has guidelines on setting up transmissions, and mitigating risks from not only the bank, but the corporate user.
From a liquidity stand-point, getting your vendors to sign an ACH CREDIT AUTHORIZATION FORM, which then allows you to "push" payment is the best way to control your liquidity and payment terms. Suggesting you'll pay your vendors via "direct deposit" is sometimes a good carrot to allow the change. Other larger vendors want their money upfront, and rather pull than allow a push. Those vendors may still receive a check then.

Topic Expert
Wayne Spivak
Title: President & CFO
LinkedIn Profile
(President & CFO, |


While I agree that the fee structure is much lower for ACH, it requires the corporate user most times to use a more expensive "platform" to gain access to a web-based ACH/Wire system.

This often times delays or stops these organizations from adopting electronic payment methods because the added expense (vs doing a paper check) isn't cost effective.

In fact, besides stuffing the check and adding a stamp, the procedures for check production are the same. In the ACH/Wire scenario you still need to do the interface between your accounting system and the bank. This procedure can run the gamut between quick and efficient to slow and clunky.

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

Wayne - the reason, in my opinion, we allow banks to charge many times outrageous amounts for wire/ACH transactions is because nearly all the banks are able to get away with it. There seems to be a standard charge from banks for wire and ACH transactions. They know companies have to do it, so they can charge it. If First Bank of Ethereal can charge $20, then why can't First National Bank of New Ethereal charge $20? Even if one went down to $15, the other could follow, but would it lose much loyal business because of $5? Maybe...or maybe not.

The larger the company the great likelihood it can have its cost reduced for these transactions based on volume. But the fees tend to be high regardless of the amount of transactions.

The banks know companies need to use this technology to continue its operations.

Credit card companies are just as bad; well perhaps it is the vendors that allow companies to pay via credit card. When I file our 40+ companies annual reports there is a credit card processing fee.

Could the expense be reduced regardless of a company's size if it has a favorable relationship with its banker?

Topic Expert
Wayne Spivak
Title: President & CFO
LinkedIn Profile
(President & CFO, |

I wonder what would happen if NewCO Bank opened down the street and started to charge reasonable fees.

Would they do more or less business? I think they would do better by a magnitude or two then the more expensive banks. Same would be true for the cost of money and other aspects.

BTW, we really need to get rid of the paper...

Len Green
Title: Performance Improvement Consultant and E..
Company: Haygarth Consulting LLC
LinkedIn Profile
(Performance Improvement Consultant and ERP Strategist, Haygarth Consulting LLC) |
Jerry Novotny
Title: Principal
Company: Jerome L Novotny, CPA
LinkedIn Profile
(Principal, Jerome L Novotny, CPA) |

One client decided to convert from check to "push" ACH payment. My client requests the necessary credit information from its vendors and also a signed agreement with acknowledging the vendor agrees to such a method. This method will be evaluated after we have converted all the vendors. I will say that we are getting a fairly high decline rate from vendors, especially smaller private-held vendors -- in excess of 15%.
One incentive for the vendors to switch is to inform them that my client will soon only process checks twice a month if they do not convert to ACH payment.

(President and CEO MobileAccountantAZ) |

I would always use a Debit card vs giving out a bank account. From a personal standpoint for my own household bills I refuse to give a bank account for any auto pay ACH's. If a dispute happens on the billing or I notice that differing amounts are taken out of my account I am able to simply call my bank and shut down that debit card linked to my account and all access to funds stops. If a business has my bank account routing and account number that's a real hassle to stop and would require opening up an entirely new bank account.

Set amounts every month yes.... pulling their AR for varying amounts? Nope.

Ross Anderson, CPA, MBA
Title: Controller
Company: TFS Capital
(Controller, TFS Capital) |

Credit cards have great protections, as the credit card company will serve as an intermediary if there is a dispute. There are also numerous credit card fraud protections that limit your exposure. Credit cards are a great way to pay for small or recurring items that are just not worth the time to pay by check.

In regards to ACH, ACH credit should not be a problem as you are the one initiating the transaction and sending it to their bank. With ACH debit, it is a little more nerve-racking as they are pulling the money from you, but you can put in a debit block so that only approved vendors are allowed to pull money, and I believe you can also put other protections in place such as approving the transaction. I typically only let governments or trusted businesses to be paid by ACH debit.

Stacy Cordier
Title: Managing Partner
Company: SSGT Partners LLC
LinkedIn Profile
(Managing Partner, SSGT Partners LLC) |

@Jerry You should talk to the smaller vendors directly and educate them on the benefits of receiving an ACH. It is similar to what they may have experienced as an individual receiving their pay for payroll or refund from the IRS. It is also less expensive for them to process and you can assure them that they will get paid when an item is due. I like the idea of limiting physical check runs, and you may want to taper that back to once a month.

For the folks that are claiming that ACH is more expensive than checks, I would urge you to consider that checks are usually much more expensive once you figure in the cost of labor to print, sort, stuff (or copy and stuff) checks. Then add follow up when the item is lost, misdirected or otherwise does not arrive at its intended destination. Once it does not arrive it needs to be tracked as an outstanding item and either cancelled, stopped and reissued or eventually escheated. You still need to transmit a file to the bank for positive pay. Instead of simply transmitting a positive pay file, load up an ACH NACHA file. Anything that does not arrive at its intended recipient gets flagged for immediate correction. You pay only when the item is due by putting the appropriate value date on it, so you should be able to negotiate better terms down the line. There are really no drawbacks. Fees are always negotiable and if your current bank does not want to negotiate, consider other options.

Topic Expert
Wayne Spivak
Title: President & CFO
LinkedIn Profile
(President & CFO, |


As I detailed earlier, ACH is not always cheaper (either in reality or perception).

It is not always easier to identify payments (it depends on how diligent the payor is, whether or not they send a separate remittance advice, etc.).

For the average business, negotiating fees with banking institutions are a non-sequitor.

Please don't take these remarks as being against the use of and the ultimate replacement of, paper checks. But a reality check (pardon the pun) until the banks in this country modify behaviors.

If you saw 60 minutes last night, some start-up FinTech company will ultimately solve this scenario for the corporate user.

Rosalio Ulloa
Title: President/CEO
Company: ProAmerica Advisors, Inc.-www.ProAmerica..
(President/CEO, ProAmerica Advisors, Inc.-www.ProAmericaAdvisors.c) |

Hi Anon,
There's a lot of great input from all posters and a majority are against vendors pulling the funds. Based on my experience as a former banker and having provided this service to business clients, I would contact your relationship manager/banker regarding the benefits and cost of initiating ACH Credits. Please keep in mind that banks may require that your bank account(s) also be on Account Analysis in order to add ACH processing. In addition, and depending on the type of entity/business (privately held or publicly traded), the bank may require that you go through the application/approval process to add ACH service. As some have mentioned, you can go with the basis ACH processing, and add ACH Positive Pay, which give more control over what's paid. FYI, there are banks that I maintain relationships with that will charge anywhere from $0.10 to $0.25 per ACH Credit/Debit, in addition to a monthly fee for the service. And if the account is on account analysis, then all banking fees will be analyze and any Earning Credit (ECR) you received based on your average collected balances may offset the fees/charges. Some of my clients, don't pay any fees because their ECR is higher and offsets all fees incurred. So, my suggestion is to have a conversation with your banker.


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