Business, Legal & Accounting Glossary
ACH, an abbreviation for Automated Clearing House, is a networked system of over 10,000 financial institutions used to process electronic fund transfers. The ACH network is overseen by NACHA, the Electronic Payments Association, which since 1974 has been running ACH. ACH transactions are used frequently for payroll transactions, direct deposits, bill payment, tax payments and tax refunds. Processing funds using an ACH transaction is a more cost-effective way of moving cash between accounts. Instead of sending payments separately, ACH transactions are processed in a batch mode, hence the economy of scale. In fact, many businesses and government entities use ACH transactions exclusively to process their payroll transactions, resulting in higher efficiency and lower costs of paying employees. All ACH transactions must adhere to rules set forth by NACHA. These rules, also known as the NACHA Operating Rules, are reviewed periodically and are amended as needed through a deliberative process with ACH network participants (i.e. credit unions, small businesses, commercial and community banks, corporations, industry vendors, and consumer advocates.)
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This glossary post was last updated: 4th February, 2020 | 3 Views.