EFT VS WIRE VS ACH: Maximizing Operational Performance with Accounts Payable Automation Software

Finance executives are tasked with optimizing operational performance, often through the implementation of intelligent and efficient systems. Automating accounts payable processes is one area in which new technologies promise to increase productivity and reduce costs. Understanding the advantages and implications of different payment methods available through accounts payable automation software — such as electronic funds transfer (EFT), wire transfers, and automated clearinghouse (ACH) payments — plays an integral role in maximizing the performance of an organization’s operations.

EFT utilizes an electronic system to transmit funds from one banking institution to another. This type of payment is relatively simple and inexpensive, as it requires fewer intermediaries and resources than a wire transfer payment, and reduces the risk of fraud. Furthermore, EFTs are often completed on the same day, while interbank wire transfers typically incur additional delay, processing fees, and delayed availability of funds. The ease and speed of transmitting funds makes EFT an attractive payment choice for payers and recipients.

Wire transfers provide the assurance of payment between payers and recipients, utilizing a secure system that relies on banks and intermediaries to process payments. Wire transfers represent the fastest — and most costly — payment option available. Payers are promised that their funds will be delivered by day’s end, assuring the recipient of the payment. Funds sent via wire transfer are generally available for use within a few hours, rather than the following day. Nevertheless, wire transfers entail an extensive list of potential fees, including transmission fees and intermediary fees, making this a more costly payment option than EFT.

ACH payments offer a complex network connecting financial institutions, operating with pre-arranged protocols. Payments are passed through one or more intermediaries before reaching the recipient’s financial institution, while the payer’s own financial institution is directly connected to the ACH to watch and record payments in real-time. This payment method is affordable and convenient, though ACH payments are not as instantaneous as wire transfers nor do they offer the same level of assurance as a wire transfer.

When deciding which payment method to utilize when automating accounts payable processes, it is important to weigh cost and convenience against speed and security. Knowing the advantages and disadvantages associated with each payment method can remain an invaluable aid in achieving a better optimization of an organization’s operations. Recognizing the impact of the payment method chosen on the organization’s financial performance — such as the associated costs of implementing a specific method — is pivotal in making the right decision. By recognizing the benefits and impact of each payment type, finance executives can implement the appropriate choice of payment method to achieve maximum optimization of their accounts payable systems.