What is Automated Clearing House (ACH) | ACH Network | ACH Software

The Automated Clearing House (ACH) is an electronic network which facilitates electronic fund transfers in between various nationalized banks within the United States of America. Rules and regulations of the ACH network is governed by NACHA (National Automated Clearinghouse Association). The network system is extremely efficient and reliable. ACH Software processes bulk quantity of debit and credit transactions in one set.

The ACH network system allows funds electronically debited or credited to a business or personal deposit account. Presently these deposit accounts include checking and savings accounts. During September 2000, ACH credit transactions can be deliver to loan a/c’s and ACH Dr and Cr transactions to Companies general ledger accounts. Automated Clearing House transactions import simple basic information such as the person name (excluding Point-of-Purchase transactions), financial institutes routing number, a/c number, price and the actual date of the transaction. Additional payment information is known as addenda records. The addenda possibly include payment-related details including shipping information or invoice number.

How does Automated Clearing House (ACH) Work?

1. An organization or a person (Receiver) appoints an organization or a person (Originator) to start a transaction to their financial establishment account.
2. The Originator prepares report about the transactions that are to be automated for its buyers or workers and push it to an Originating Depository Financial Institution (ODFI).
3. The Originating Depository Financial Institution (ODFI) compiles the Automated Clearing House (ACH) transactions from different organizations, consolidates the report and submits it to the ACH service provider.
4. ACH service provider processes transaction files by submitting it to Originating Depository Financial Institutions (ODFIs) and transfer it to Receiving Depository Financial Institutions (RDFIs).
5. The RDFI gets entries for its customer accounts and transfers entries on the due date. Transactions are also presented on the account statements.

ACH Flow Diagram: