How eCheck Payments Work and Why Firms Should Use Them
Today, an increasing number of businesses are offering digital and online payment options for their customers. It’s easy to see why. Electronic payments not only offer a more convenient way for customers to pay but, when implemented intelligently, can significantly simplify an organization’s accounting records and processes. But with so many digital payment methods out there, it can be hard for law firms to know which ones are best for them and their clients.
While digital payments are commonplace for retail and small purchases, some customers still prefer to write a check when making big or important purchases. Electronic checks (a.k.a. eChecks) allow law firms to offer their clients a straightforward digital payment method without the inconvenience and risk that comes from handling paper checks.
Adding eCheck payments is a great way for legal professionals to modernize the client payment experience and help streamline their accounting processes. But how do electronic checks work? What’s the difference between an eCheck, a direct deposit, and wire transfer? How do you start accepting eCheck payments?
In this article, we’ll do a deep dive into eChecks, how they work, the top reasons law firms like using them, and how you can implement them in your business.
What are eCheck Payments?
An eCheck is a check that can be written and accepted 100% online. Like a paper check, an eCheck allows a business to withdraw the amount directly from the payer’s checking account. Payments are processed by the ACH (Automated Clearing House) Network, a network used by participating financial institutions and businesses. ACH transfers are used to make a wide variety of direct payments - pretty much anytime you pay for something without putting in a credit card number or writing a paper check, it’s using the ACH.
Part of the reason eChecks can seem confusing at first glance is because there are a lot of different terms used to describe the same thing. All of the terms below are synonymous with eCheck:
- Online Check
- Internet Check
- Direct Debit
Are eChecks different from wire transfers? While a wire transfer and eCheck are both ways to move money between bank accounts, there’s a few key differences between them. First, wire transfers are often used for cross-border or sensitive transactions because they are handled directly by the bank and done one at a time, usually for a fairly substantive fee. On the other hand, eChecks are processed in batches by the ACH, making them less labor intensive. Second, like a paper check, payment on an eCheck can be canceled, whereas a wire transfer can’t be stopped once it’s initiated.
How Do eChecks Work?
The process to accept eChecks is almost identical to the one used for paper checks, with speed and security being the biggest differentiators. Handling check payments electronically reduces the processing and hold times, making funds available faster. Also, since there is no paper record to intercept, and payment processors use secure forms, the client’s information is better protected.
Here are the steps that go into processing an electronic check:
1. Authorization Request: First off, the client has to authorize the use of electronic payment via a signed form, over the phone, or using a secure online form.
2. Payment Information and Setup: Using a payment processing solution, the firm enters the details of the payment. Payments can be set up to be one-time or recurring.
3. Finalize and Submit: Once the details are confirmed, the payment is submitted then processed through the ACH. Funds typically take 3-5 business days to transfer, but some solutions allow for limited same-day fund availability.
To maintain legal trust and IOLTA compliance, funds will need to be put into specific accounts depending on the type of payment being made. Luckily, legal accounting software can streamline this process and significantly lower the risk of making an error.
Why Should Your Firm Accept Electronic Checks?
Offering digital legal payments is an important step for businesses looking to meet modern customer expectations. Like mobile payments and other digital payment methods, eChecks provide clients a simplified way to pay for retainers and other legal fees. Additionally, ACH payments provide a number of unique benefits for law firms:
Increases Revenue and Efficiency
Online checks offer a number of financial benefits over paper checks and even other electronic payment methods. First and foremost, eCheck payments incur much lower processing fees compared to credit cards and many 3rd party payment processors. Since payment processing fees must be covered by the firm’s operating account and not the clients, those expenses can add up quite a bit over time. Accepting eCheck payments for large sums can also save a great deal of money on individual payments as well.
In addition to the lower fees, eChecks also save law firms time in a few crucial ways. Most obviously, with electronic checks, accounting teams do not need to spend extra time manually logging and depositing checks. But better yet, compared to paper checks, eChecks have shorter processing and hold times, which means you’ll have money available faster.
Maximizes Payment Security and Compliance
Simply by handling paper checks (or even oldschool paper banking forms), your firm’s privacy and security risk increases exponentially. Before a paper check is deposited in a bank, it provides a treasure trove of sensitive information for criminals and fraudsters. Physical checks can also be altered or tampered with in ways that eChecks can’t. Clients still have to mail or otherwise physically deliver the check to your office, and this can create opportunities for it to be stolen in transit.
In addition to traditional security concerns, accepting eCheck payments also can help reduce legal compliance risk. Compared with paper checks, eChecks are much easier to log and legal accounting software can ensure that funds are handled correctly.
Long story short, eChecks are an inherently safer option than paper checks. Since all eCheck transactions are handled online through secure online payments software, there’s no opportunities for criminals to steal account information or make alterations. All sensitive data is encrypted and the client’s accounting and routing numbers are also verified with each transaction to ensure accuracy and proper ownership.
Makes Payment More Convenient
Beyond addressing security concerns, online payment solutions take the hassle out of making payments by mail. For instance, why wait for your clients to write a check, stamp it, and send it by mail? Instead, they can easily type in their billing information into a secure payment portal and send payment with a simple click of a button. Not only is this more convenient for them, it takes the mystery out of whether their payment is heading your way—you’ll be able to see right away that their check payment is being processed. In other words, fewer headaches for both of you.
Using eChecks also enables you and your clients to easily set up recurring payment schedules. You and your client can arrange to have funds debited from their account at specific intervals—once a week, twice a month, or until a dollar amount has been reached. Not only is it more convenient, but adding eCheck along with other digital payment options is an easy way to increase customer choice and satisfaction. In fact, a recent study showed that 70 percent of consumers reporting having a higher rate of satisfaction with a business if they were offered multiple ways to pay their bill.
Reduces Reliance on Paper
The rising use of digital payments is also an opportunity for offices to cut back on paper waste. Switching to digital payments, including eChecks, is a fantastic step towards transitioning to a completely paperless practice. Better yet, modern payment solutions can also automatically handle things like payment requests and receipts via email. Making the swap to digital payment is a win-win, both in streamlining your day-to-day tasks and the environment.
How Do You Accept eCheck Payments?
To start accepting electronic checks at your firm, you first need to sign up for an ACH or eCheck merchant account. Signing up is simple and approval generally only takes a few days. To sign up your business will need to provide the following information:
- The firm’s name and address
- The federal tax ID number
- How long the business has been in operation
- Estimated transaction volume
- Bank information
This setup process can also be done through your digital payment provider. Once approved, trusted technology partners like LawPay can then set up a payment portal or other secure form to send to your clients.
Manage Your Law Firm’s Payments Today
Digital payment technology makes it easier than ever for law firms to accept online check and card payments. In addition to the numerous benefits of incorporating digital payment options into your practice, LawPay’s best-in-class legal payments solution is specifically built to integrate with your existing legal software and tools. LawPay’s proprietary eCheck processing is simple to use and fully compliant with IOLTA rules, ensuring you never commingle earned and unearned funds.
Having the right tools to handle eCheck and other digital payments are all the more essential for independent attorneys or smaller firms that can’t afford a dedicated accounting team. But even firms that specialize in highly-scrutinized financial areas like tax law, commercial banking law, and insurance, rely on LawPay to keep their business running smoothly. Jeff Freeman, a partner at Freeman Tax Law notes, “LawPay has helped us to grow as a firm because we're more able and ready to accept client payments. Echeck has made our lives, as a firm, much simpler."
Sign up today to start accepting eChecks and other forms of digital payments that can improve cash flow, streamline your accounting processes, and lower risk.