How should we pay vendors: ACH, wire, check or card?

01The rails, side by side#

Fees vary by bank and plan, so compare your own account’s pricing rather than a published average. The bigger cost differences are usually time spent and money lost to error, not the per-transaction fee.

• ACH: a batch network run by the banks under Nacha’s rules. Cheap or free from most business accounts, settles in one to two business days (same-day ACH is available for a fee), and can be returned in limited cases. The default for paying US vendors.
• Wire: a direct bank-to-bank transfer, usually settled the same day. Your bank charges a fee per wire. Once sent, it is very hard to recall. Used for large one-off payments, closings, and international vendors.
• Check: paper, mailed, deposited by the vendor whenever they get to it. Slow, with printing and postage costs, and exposed to mail theft and check washing. Some vendors, landlords and government agencies still require it.
• Card: the vendor pays the processing fee (and may pass it on as a surcharge where allowed), you get the statement cycle as float and sometimes a rebate. Good for software and small vendors; impractical for large invoices.
• Instant payments (RTP and FedNow): settle in seconds, around the clock, and are final. Availability depends on whether both banks are connected.

02Choosing a rail for each vendor#

Set a default method per vendor in your bill-pay tool when you onboard them, alongside the W-9 and payment terms. ACH for anyone who will take it; card for subscriptions and anything you would rather not hold bank details for; wire when the amount is large and timing matters; check only on request.

Mind settlement time when scheduling. A Net 30 bill paid by standard ACH on day 30 arrives on day 31 or 32. Bill-pay tools usually schedule the debit a business day or two before the due date so the money lands on time; a check needs a week or more of lead time for mail.

03Fraud: where the money actually goes missing#

The largest losses in small-company AP come from payments sent to an attacker’s account by the company itself, not from stolen cards. The usual version is a vendor-impersonation email: a message that appears to come from a real supplier, sometimes from their actual compromised mailbox, saying their bank has changed and attaching new details. The next ACH or wire goes to the attacker. Because you authorized it, your bank is generally not liable.

The control is procedural. Bank details are changed only after confirmation through a channel you already trusted (a phone number from the contract or an earlier invoice, not the email), by someone other than the person who releases payments. Keep the history of every change: who requested it, who verified it, when. Flag any payment going to details that changed recently, and hold it until a second person looks.

For checks, ask your bank for positive pay: you upload the list of checks issued and the bank refuses or holds anything that doesn’t match. For electronic debits, ACH debit blocks or filters stop anyone not on your approved list from pulling money from the account. Banks are also tightening their own side: Nacha’s rules now require every business that originates ACH payments to run risk-based monitoring for payments induced by false pretenses, phased in during 2026.

04Recording each payment#

The entry is the same for every rail when it pays an existing bill. Debit side: accounts payable. Credit side: cash, for ACH, wire, check or instant payment. A card payment is different only in where the credit goes: credit card payable instead of cash, because you now owe the card issuer rather than the vendor. The card liability is cleared later, when the statement is paid from the bank.

Fees belong in their own account. A $25 outgoing wire fee is debit bank fees, credit cash, recorded separately from the payment so the vendor’s balance still ties to their statement. An international wire that loses value in intermediary fees leaves a short-paid bill; agree with the vendor who absorbs the difference and record it explicitly.

Match the bank transaction to the bill payment rather than categorizing it as an expense. Categorizing it again counts the cost twice: once when the bill was recorded, once when it was paid.

05A worked example: the check that crosses month end#

On September 29 you write check 1042 for $1,250 to Harbor Legal LLP to pay their invoice 2291. The entry is dated September 29. Debit side: accounts payable $1,250. Credit side: cash $1,250. The firm deposits the check on October 6.

At September 30 your books show $1,250 less cash than the bank statement does. That is correct, and the bank reconciliation explains it: bank balance, less outstanding check 1042 of $1,250, equals the book balance. In October the check clears, the bank catches up, and the item drops off. If it is still outstanding after a few months, call the payee; if it was lost, void it with a dated reversing entry and reissue. State unclaimed-property law, not your own convenience, decides what eventually happens to a check nobody cashes.

06Check stubs and the paper trail#

Each check’s stub (or the bill-pay tool’s payment record) should show the check number, date, payee, amount and the bills it pays. Keep check numbers in sequence and account for every one: issued, voided or spoiled. A gap in the sequence is the first thing a reviewer asks about.

Voided checks are recorded, not deleted. Write VOID across the check, keep it, and if it was ever entered in the books reverse it with an entry dated the day it was voided. Deleting the original changes a period you may already have reported.