Electronic Funds Transfer for Small Businesses: What It Is and Why It Matters

If you run a small business, you know how valuable your time and money are. That’s why an Electronic Funds Transfer (EFT) might be useful to you. Instead of having to deal with paper checks or waiting around for manual bank processes, EFT lets you move money quickly, securely and automatically.

So let’s take a look at how EFT works, why it’s a smart move for small businesses, and how you can start using it with confidence.

Managing international business payments?
Try Wise Business ->

What Is An Electronic Funds Transfer In Business (EFT)?

Electronic Funds Transfer, or EFT, is a broad term for moving money digitally from one bank account to another. No paper checks, no physical cash, just a quick and secure electronic process. EFT simplifies how businesses handle money.¹

EFT includes several types of transactions like ACH transfers, wire transfers and even debit card payments.² The most important perk of EFT is that it saves time and reduces errors compared to manual payment methods.³ Not to mention, payments often process faster and more securely, which helps improve your cash flow.⁴

For small businesses, adopting EFT means fewer trips to the bank, lower processing costs and a more professional way to handle payments.⁵

Common Types of EFT Transactions

Direct Deposit

Direct deposit is one of the most common EFT methods used by small businesses to pay employees. It allows funds to move straight from your business bank account into your employees’ accounts – no paper checks, no delays. It’s secure, fast and helps speed up payroll processes. Employees love it because they don’t have to run to the bank, and business owners appreciate the reduced processing costs and lower risk of fraud compared to physical checks.¹ Many payroll systems integrate direct deposit automatically, so setup is relatively painless.

ACH Transfers

ACH (Automated Clearing House) transfers are the backbone of EFT transactions in the U.S. They're used for things like recurring bill payments, vendor payouts and client invoicing. ACH is cost-effective, often cheaper than wire transfers and ideal for non-urgent payments. While it’s not instant, it usually clears in one to two business days.² ACH is also widely accepted and can be easily scheduled, making it a solid choice for managing predictable cash flows.

Wire Transfers

Wire transfers are faster than ACH but come with higher fees. Businesses typically use wire transfers for large or time-sensitive payments, like paying a supplier overseas or closing on a deal. While wire transfers are considered very secure, they’re usually irreversible and must be double-checked before sending. They’re commonly used in real estate, law and international business settings.³

ATM Transactions

Believe it or not, ATM transactions fall under the EFT umbrella, too. Anytime you withdraw or deposit business funds via an ATM, it’s considered an EFT. While not the most commonly discussed type, ATMs can still be a handy tool for small business owners who need quick cash deposits or withdrawals, especially after hours.⁴

Government Tax Payments

Even the IRS and U.S. Treasury use EFT to accept tax payments. Businesses that pay federal excise taxes or corporate income tax often use the Electronic Federal Tax Payment System (EFTPS). This method is fast, trackable and preferred by the government for its reliability. It also helps reduce errors from manually written checks or mailing delays.⁵

Wise Business Could Help Your International Company Save on Global Payments

How to Set Up EFT for Your Business

Setting up your EFT is very easy, and if you follow these steps, you’ll be up and running in no time.

Step 1: Choose a reliable provider
Start by selecting a trustworthy bank or payment processor that supports EFT. Most major providers offer this service.

Step 2: Gather your business information
You’ll need to provide essential details like your business bank account and routing numbers, plus authorization to send and receive electronic payments.¹

Step 3: Enable EFT features
Once you're set up, you can automate payroll, schedule recurring payments, and even accept customer payments faster.²

Step 4: Track transactions in real time
Many platforms allow real-time tracking of transactions, giving you better visibility and control over your cash flow.³

Keep in mind that you’ll need to follow any compliance requirements specific to your industry, especially if you're processing high volumes or working with government entities.

EFT vs. Other Payment Methods

Compared to paper checks, cash and credit cards, Electronic Funds Transfer (EFT) offers small businesses a faster, safer and more cost-effective way to send and receive payments. EFTs typically process within one to two business days, which significantly reduces the wait time common with manual checks and deposits.¹ They’re also highly secure, using encryption and bank-level authentication to minimize fraud and human error.² EFTs differ from credit cards and cheques because transactions can be automated, so they’re ideal for recurring payments like payroll or vendor invoices.³

Save Time and Money On Overseas Payments With Wise Business

Wise Business can help you save big time on international payments.

Wise is not a bank, but a Money Services Business (MSB) provider and a smart alternative to banks. The Wise Business account is designed with international business in mind, and makes it easy to send, hold, and manage business funds in currencies.

Signing up to Wise Business allows access to BatchTransfer which you can use to pay up to 1000 invoices in one go. This is perfect for small businesses that are managing a global team, saving a ton of time and hassle when making payments.

Use Wise Business >>

Some key features of Wise Business include:

• Mid-market rate: Get the mid-market exchange rate with no hidden fees on international transfers

• Global Account: Send money to countries and hold balances in multiple currencies, all in one place. You can also get major currency account details for a one-off fee to receive overseas payments like a local

• Access to BatchTransfer: Pay up to 1000 invoices in one click. Save time, money, and stress when you make 1000 payments in one click with BatchTransfer payments. Access to BatchTransfer is free with a Wise Business account

• Auto-conversions: Don't like the current currency exchange rate? Set your desired rate, and Wise sends the transfer the moment the rate is met

• Free invoicing tool: Generate and send professional invoices

• No minimum balance requirements or monthly fees: US-based businesses can open an account for free. Learn more about fees here

Final Thoughts

Electronic Funds Transfers in business are a practical, reliable and secure way for small businesses to speed up payments. It reduces human error, cuts down on processing time and enhances cash flow management. And while EFT may sound technical, it’s one of the easiest payment systems to adopt with the right banking setup. For small business owners who want to modernize operations and minimize financial friction, integrating EFT is one of the best moves you’ll make.

Sources:

1. Payment Depot – What is an EFT Payment?
2. EMS Corporate – What Are EFT Payments
3. Paycron – What is EFT Payment: A Comprehensive Guide
4. TTB.gov – Tax Payments by Electronic Funds Transfer
5. Stax Payments – EFT vs. ACH