ACH (Automated Clearing House)

What is ACH, and how does it work?

ACH is a batch-processing network governed by Nacha, the National Automated Clearing House Association. It groups together transactions and processes them at scheduled intervals, typically once per day. ACH prioritizes scale and cost-efficiency over instant transfer speeds, unlike real-time payment systems.

Here’s how a standard ACH transaction works:

1. A business (the Originator) submits a payroll file through its payroll provider or bank.
2. That file is sent to the Originating Depository Financial Institution (ODFI).
3. The ODFI passes the transaction to the central ACH Operator, such as the Federal Reserve.
4. The ACH Operator routes the transaction to the employee’s bank, the Receiving Depository Financial Institution (RDFI).
5. Funds are deposited into the employee’s account.

Most ACH transactions settle within 1–2 business days, though same-day ACH is becoming more common for eligible payments.

Why ACH matters in payroll

When it comes to payroll processing, ACH is the engine under the hood. It’s how most employers deliver Direct Deposit — which is now the preferred payment method for over 90% of U.S. workers.

With ACH, employers avoid common pain points:

• No paper checks to print or deliver
• Fewer manual errors and data entry mishaps
• Reduced fraud risk compared to physical checks
• A seamless, automated payroll workflow that scales

ACH isn’t just convenient — it’s become essential. Employees expect fast, accurate pay, and ACH delivers that with reliability baked into every step.

Common business use cases

ACH is used far beyond Payroll. Businesses leverage the ACH network to simplify a range of financial operations, including:

• Recurring Vendor Payments: Automate monthly payments to suppliers and contractors.
• Client Billing: Collect subscription fees or invoices via recurring ACH debit.
• Tax Payments: Send federal and state payroll taxes directly from your payroll system.
• 401(k) Contributions: Transfer employee and employer match funds to retirement providers.
• Reimbursements and Bonuses: Deposit reimbursements and incentive payments without delay.

Because ACH can be configured to run on a schedule, it’s ideal for businesses managing employee scheduling, time tracking, or multi-location operations — everything happens on autopilot.

ACH vs. wire transfers vs. EFT

ACH balances affordability and dependability — perfect for routine business transactions like payroll.

Potential limitations

Despite its strengths, ACH isn’t without considerations:

• Cutoff Times: Payments must be submitted by specific deadlines to hit same-day or next-day windows.
• Transaction Limits: Some bank’s payroll size or frequency of ACH transfers.
• Reversals: While errors can be corrected, ACH reversals take time and paperwork.
• Bank Holidays: ACH doesn’t process on weekends or federal holidays.

That said, most payroll issues can be mitigated with proper planning, especially when you’re using a full-service provider like Fingercheck.

How Fingercheck uses ACH to automate payroll

At Fingercheck, ACH is fully embedded into our all-in-one payroll platform. Every payroll run automatically generates a compliant, secure ACH file that deposits wages into your team’s accounts. We handle:

• Submission to the ACH network
• Deduction routing (for benefits, garnishments, etc.)
• Tax payments and filings
• Employer and employee alerts

You can also offer Pay On-Demand through Fingercheck, letting employees access a portion of earned wages — with the same speed and reliability powered by ACH.

In summary

ACH has become the invisible powerhouse behind modern Payroll. If your business still relies on paper checks or manually logging into a bank portal to pay vendors or staff, it’s time to simplify.

With Fingercheck, you don’t have to think about ACH — it’s built into every paycheck, every tax filing, and every reimbursement. Whether paying hourly or salaried staff, ACH ensures you stay compliant, timely, and stress-free.

Explore how Fingercheck’s payroll and ACH services can save you time and money —while keeping your workforce happy and paid.

Fingercheck and any related entities do not offer tax, accounting, or legal advice. This content is designed for informational purposes only and should not be considered a source of tax, legal, or accounting advice. It is recommended that you consult your tax, legal, and accounting advisors before undertaking any related activities or transactions.