April 23, 2014


Thought Leadership
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Are your revenue streams flowing?

Spring has arrived! The rivers are high and all the local streams of revenue are flowing. Did I just say "streams of revenue"?
Organizations are always looking for convenient ways for their customers to pay them. What are some of these revenue streams?

Traditional

  • Bartering: Goods/services are directly exchanged for other goods/services.
  • Currency: A medium of exchange that has been in existence for thousands of years.
  • Checks: A demand instrument used to transfer funds from payor to payee.

Electronic

  • Fedwire: the Federal Reserve's funds transfer system is a real-time method of transferring immediate funds and supporting information between two financial institutions' Fed accounts. Thus, each customer's account is debited/credited according to instructions. This transaction is final.
  • Automated clearing house: An electronic alternative to checks with the ability to transmit additional related information. ACH is a batch process compared to the real-time Fedwire and payment usually occurs the next business day.
  • Merchant debit/credit-card processing: An agreement between the seller and the financial institution whereby the seller accepts payment via a card.

Both the traditional and electronic approaches to payment infer that the organization is relying on the customer to initiate payment.
But what if an organization had the ability to do the initiating of payment for its customer? This added dimension is one of the benefits to the ACH system. The organization controls the revenue stream and the customer saves payment-processing time. Some examples of an ACH auto-debit include:

  • Condo association fees
  • Mortgage/auto/insurance/utilities payments
  • Church tithing
  • Gym memberships

Per the Nationl Automated Clearing House Association (NACHA), more than 15,000 depository financial institutions originated and received 18.2 billion ACH payments in 2008.
If you're curious to learn more about initiating ACH debits, contact your financial institution. Set-up would most likely include signing an online banking agreement and an Automated Clearing House agreement. ACH transactions are processed through your secure online banking site.
The next step is to obtain written approval from your customer(s) so you can build an electronic record for them. This record will include your customer's bank-account number and their financial institution's nine-digit routing number. Many financial institutions offer sample ACH authorization forms for you to copy.
What is the cost for each ACH transaction? We are talking cents. Processing a paper check for most financial institutions cost more than processing an ACH transaction. All funds are immediately available once an ACH credit transaction is posted to your account. Check clearing could take from one day to up to five days for total availability of funds.
Creating multiple revenue (options) streams for your cutomers could help with your cash flow. It's all about relationship and expectation. Of course, one expectationis that organizations expect to be paid promptly for their product or service.

Stephen Dolan is a vice president at Enterprise Bank in Lowell and a treasury management advisor. He holds the designation of certified treasury professional (CFP) from the Association for Financial Professionals. He can be reached at 978-656-5571 or via e-mail at stephen.dolan@ebtc.com

To speak with one of our trusted advisors about your needs, call 978-459-9000 or contact us today.