You may have heard of Publisher’s Clearing House – a 70-year-old magazine subscription company famous for its million dollar sweepstakes incentives. But what do you know about the Automated Clearing House? ACH, as its known to its friends, is the  latest trend in how to pay your vendors for merchandise. 

The Automated Clearing House is a network that allows for electronic money transfers to be made between banks and credit unions. It’s an option that is becoming more popular with independent retailers for paying invoices. Why? Using ACH avoids the potential of postal delays, fraud and theft that are inherent with mailed checks.  And when a vendor decides to add a fee for the use of a credit card for payment, ACH can save you this 3% to 4%. There may be a small transaction fee associated charged your financial institution for the ACH payment method, but it is usually only a few dollars.

You will need to play ahead to use an ACH transfer. Because these are done in batches, they can’t usually be done the same day that an invoice is due. In fact, the transfer could take several days, especially if there is a weekend or bank holiday involved.  When you need to make a payment right away, a credit card or wire transfer from your bank is a better option.

For small invoices, and larger ones with no fee for charge cards, it may still be advantageous to use a credit card. Take advantage of any points your credit card offers, and the grace period before the amount is due – but only if you know that you’ll be paying off the full balance on time.  The median credit card interest rate is now almost 25%, so you should never be borrowing money this way.

If you have recurring payments, check to see if you can set up an ACH to take care of this for you.  It is also a secure and easy way to pay your employees, and is used by many payroll processing companies. While you may never win a big Publisher’s Clearing House prize, the Automated Clearing House can save your business a significant amount of money when used to avoid credit card fees on large invoices, as well as potential penalties on late or lost payments.

Happy Retailing,

Carol “Orange” Schroeder

Please note that the won’t be a Specialty Shop Retailing blog next week due to the Las Vegas Gift Show. Hope to see you there!