How to Set Up EFT for Contractor Payments (and How It'll Benefit Your Business)

How To

You’re passionate about your profession in the home and field services. But at the end of the day, you’re running a business. You need to be paid in full and on time.

One way to ensure this is by offering several different payment options. This gives your clients a choice. They can pay their way, which encourages fast payments.

If you currently accept just cash or check, now could be the time to offer EFT payments, too.

What are EFT payments? What are their benefits? How do you set them up? This guide has the answers.

First up, we’ll explain what EFT is and how it works. We’ll give you step-by-step instructions on how to get set up.

Then, we’ll explore how EFT payments benefit your contractor business. Getting paid faster is just the tip of the iceberg.

Finally, we’ll offer three quick tips for streamlining EFT payments. You’ll walk away ready and confident to expand your payment options. Let’s get started!

What Is EFT?

Electronic funds transfer (EFT) is a way to send money. Everything happens electronically—there’s no need for paper checks or cash.

EFT includes things like direct deposit, debit card use, and online payments. It’s fast and allows transactions to be processed 24 hours a day, seven days a week.

It works like this:

The transfer is initiated. This can happen using online banking, an app, a payment processor, or another digital method.
The bank processes the transfer. This takes place on a secure network.
The transfer is complete. The receiving bank gets the information about the transaction. The money is then deposited from one account to another.

Should you accept EFT payments? Absolutely. Here’s why.

A big part of staying competitive is meeting customer expectations. These expectations aren’t stagnant. They evolve, shift, and change over time.

Decades ago, cash and checks reigned supreme. But today, many people prefer digital payments. They’re used to them, and they’re quick, convenient, and secure.

FROM ONE OF OUR PARTNERS: ACH Versus Wire Transfers: Which Payment Method Is Right for Your Business?

Setting Up EFT Payments for Contractors

The EFT payment process isn’t complicated at all. In fact, you’ve probably been through it yourself. Here’s how it unfolds:

You give the client your bank details.
The client starts the payment. They might do this on their online banking portal or using your payment system.
The client’s bank looks at the transaction. If the client has enough funds, the amount is sent electronically to your bank. This process typically takes a couple of days—it’s generally quicker if you and the client use the same bank.
Your bank gets the funds and deposits them into your account.

If this is a payment method you’d like to use in your business, you’ll need to get set up.

The good news? You don’t need much more than a bank account. The even better news? You can leverage payment management software to make payments a competitive advantage.

We’ve put together a step-by-step setup guide. Here it is:

Step 1: Choose a Reliable Financial Institution or Payment Processor

First up, you need to choose either:

A financial institution like a bank or
A payment processor

It’s imperative that the organization you pick is reliable. More specifically, they need to be trustworthy and have a rock-solid security track record.

Learn about their privacy and fraud protection measures. Do they encrypt payment data? Do they enable multi-factor authentication (MFA)? How do they monitor for fraud?

Alongside security, find out how much they charge. EFT transactions that take place through a payment processor aren’t always free.

The fee structure varies between providers, too. Some charge per transaction fee, and others take a percentage. Even banks have hidden costs, like account fees.

Make sure you’re aware of the expenses before you open an account.

Step 2: Gather Your Account Information

Your clients need to know where to send their money. So, gather your account information. This will typically include:

The name of your financial institution
Your bank account number
Your nine-digit routing number, also called an ABA number
The type of account, whether checking or savings
The name attached to the account, which could be your personal name or business name

Step 3: Add Your Information and Payment Terms to Your Invoices

You’re set up and ready to go. Now, you need to tell your clients that you accept EFT payments.

To do this, update your payment terms and add them to your invoice.

For example, you might write something like:

“Please pay by electronic funds transfer (EFT). Make your payment using these bank details:

Bank name: [Add your bank name here]
Account number: [Add your account number here]
Routing number: [Add your routing number here]
Payment reference: [Please use the invoice number as your reference]

Step 4: Consider Payment Management Software

Payment management software takes your billing approach and completely revolutionizes it. It automates tasks, improves communication, streamlines workflows, and gives you access to growth-enabling data.

Here are some reasons you might consider investing in payment management software:

Track multiple payments the easy way. The software tracks when EFT payments come in, so you know who has paid and who hasn’t.
Send automatic reminders about upcoming or overdue payments. That’s one less thing on your to-do list.
Keep organized and accurate records of all payments, including EFT payments. You don’t have to enter the data manually. Instead, the software does it for you.
Make tax reporting easier with payment management software that integrates with your accounting tools.
Offer convenient payments for your clients. Software allows you to accept multiple different payment options. This includes EFT, credit cards, and mobile payments. More choice makes for a more personalized customer experience.
Set up recurring payments and subscriptions if you need to. For example, think about your maintenance services. You could set up automatic EFT payments that happen on a regular schedule. It’s easier on your clients, and your cash flow becomes more reliable.

RELATED ARTICLE: How to Reduce Late Payments for Contractors

How EFT Payments Benefit Your Contractor Business

According to Business.com: “An organization’s ability to adapt can be considered a competitive advantage.”

Adapting means embracing change. It means rethinking how you do things to better meet your customers’ expectations.

Offering new payment options like EFT is part of this process. It’s a way to continuously improve, and the rewards are worth it.

5 Reasons to Offer EFT Payments

Still on the fence about offering EFT payments? Here are five reasons that’ll get you over the line:

EFT payments improve your cash flow management. How? They encourage your customers to pay you on time. Digital payments like EFT have overtaken traditional payment options in the U.S. They are preferred. And when you remove as much friction as possible in the billing process, your clients are more likely to pay on time.
EFT payments demand far less paperwork and admin. You don’t have to pay for someone to process checks or deposit cash. You don’t have to waste time doing this yourself either. Instead, the entire transaction is handled digitally.
The funds will be available to you soon. Generally, you’ll have the money within 24 to 72 hours. This means you can pay suppliers on time, make sure your employee’s wages are covered, and even invest in new tools or innovations.
EFT payments are much easier to track. When the payment is initiated and when the funds are received, they are recorded automatically. You have an exact timestamp and documentation of the payment. You don’t have to enter data automatically, which is prone to human error. This makes financial planning that much simpler. It’s also a big help when tax time comes.
When you give clients a way to pay that they like and feel comfortable with, you boost satisfaction levels. Higher customer satisfaction repays dividends. They are more likely to choose your business again. They trust you, and this leads to loyalty. They might also recommend you to friends and family. That’s free advertising!

Common Challenges and How to Overcome Them

EFT payments are not perfect.

One challenge is fees. As we mentioned, banks and processors might charge a percentage of the transaction amount. They might have a flat fee, too.

These extra costs eat into your profits. But it’s not a deal-breaker. You can:

Research your options and choose a provider with lower fees. Just be sure to prioritize reliability and security over a cheaper service.
Pass on the expense to your clients. It likely won’t be much. Plus, according to one study, “consumers are willing to pay a 5% premium for convenience.”

Another challenge is payment reversals. These happen if there’s an error in the payment information. They also occur if your client doesn’t have enough money to cover the transaction.

Payment reversals can be disruptive. You can mitigate the risk by:

Making sure your payment information is accurate and up to date.
Choosing a provider that uses pre-authorization. This checks for funds before the payment is processed.

FROM ONE OF OUR PARTNERS: 5 Things You Should Know About Accepting Electronic Payments

3 Tips for Streamlining EFT Payments in Your Business

Start implementing EFT payments today. Follow these three tips:

Research and choose a provider. You can either stick with your bank or go with a payment processor. Just be sure to research thoroughly and verify reliability.
Automate payment processes. If you choose a payment processor, you might have access to automation tools. Use these to make your life easier—and get paid faster. For example, automatic reminders can nudge your customers to pay before the due date.
Set clear payment terms. Ambiguities can lead to disputes. Make sure you note the due date and how to pay. Explain what happens if the client doesn’t pay on time. Give your contact information, too, in case they have questions or concerns.

How to Set Up EFT for Contractor Payments (and How It’ll Benefit Your Business)