Guide to Electronic Check Processing

Understading The Electronic Check Processing System

Electronic check processing is the means by which you can take a paper check and submit it for payment electronically instead of taking it to the bank. Your bank may offer you this capability if you purchase a check scanner from them. The scanner takes an image of the check and submits that image to the bank electronically. The bank then processes that check just as if you had handed over the physical check itself. An easier way to process checks electronically is to use a software program or a web-based payment processing service. When using a web-based system or ASP, you don’t need to install any software or buy any hardware. You simply key in check information and submit the transaction. Whenever people switch to a new technology, it is very important that they feel comfortable with the technology. When this new system involves money—it becomes even more important for both the business itself and its customers.

I recommend: 

NACHA.org , the organization that oversees all ACH transactions, to learn more about the system behind electronic check transactions. 

Electronic Payments.org is another great soruce to learn about how electronic check transactions can benefit both you and your customers.

Implementing Electronic Check Processing in Your Business

Implementing electronic check processing involves choosing a processor and changing your businesses processes to conform to rules for electronic check processing: 1. Notify: You must notify your customers that their paper checks will be processed electronically. You can do this in writing on your invoices, or by posting a sign at your place of business. 2. Collect and Convert: The paper check is converted to a one-time ACH-based electronic payment, with the customer's bank routing number and account number captured. You then make a copy of the check for your file, stamp the original check "VOID" and discard it. 3. Process: An ACH file for the check is created and presented to your bank—this is typically done by the payment processing company; the payments are processed through the ACH network, the customer's account is debited, and your account is credited. The payment is documented on a customer’s bank statement with the check number, amount, and the billing company name

I recommend: PaySimple--they make the process easy with a user-friendly web-based system and a wealth of free marketing and informational materials you can use to implement systems and educate customers.  Searching Google for "electronic check processing" will also provide a list of companies that provide these services. 

To learn more about the business processes you must follow when processing checks electronically, see "Introduction to Check Conversion."