How to use Zelle for small business transactions

How does Zelle work?

As a peer-to-peer (P2P) digital payments service, Zelle uses the Automated Clearing House (ACH) system to move money from one bank account to another. While initiating an ACH transfer from your bank account could take as much as three business days, a transaction from Zelle can move the money between bank accounts in mere minutes. 

You can think of it like a digital check, where the routing information, signature, and other details are handled by Zelle to ensure that the transaction is secure and fast. Unlike PayPal or other digital payment services, Zelle does not allow you to accept credit card payments. However, you can set up your Zelle account to work with your debit card. 

Zelle integrates directly with over 10,000 U.S. banks and credit unions, including Chase, Wells Fargo, and Bank of America, to allow you to send and receive payments easily. To send money with Zelle, you can send directly from your financial institution via the bank’s mobile app or through the Zelle app. Either way, the money is deposited almost immediately into the recipient’s deposit account.

In order to send a payment from the Zelle app, the payer just needs the recipient’s email address or phone number. You have to make sure that the money you’re going to send is in your account, though, because the payment does go directly through and there is no way to cancel a payment. 

Why would a business use Zelle?

The number one reason to use Zelle for small business is because the payments are immediate. You can request a payment from a customer or vendor and the money will be in your business bank account within minutes. 

Another reason to use Zelle is that it’s a convenient payment option for your business customers. Accepting contactless payments through Zelle can set you ahead of your competitors when it comes to ease of working together. All your customers need is your mobile phone number or email address and they can pay you instantly from their mobile banking app or Zelle account. 

As a business owner, receiving payments quickly helps open up cash flow and gives you breathing room in your day-to-day operations. Also, anytime you can reduce the number of paper checks or cash you’re dealing with, you’re helping reduce one more headache in your business operations. 

Zelle is also completely free to use, and makes it easy to request money and get paid immediately, even between completely different banks. 

How to use Zelle for business

If you have a business checking account with a bank that uses Zelle, you will need to go through enrollment on the bank’s mobile app or online banking service. Once you’re enrolled, payments sent through Zelle will be deposited into your account automatically. 

If your bank doesn’t work with Zelle, you will need to download the Zelle app and open an account with them. You’ll have to connect your bank account manually, and your first payment may take up to three business days to transfer to your account, but after that, it should be immediate. 

Once you are enrolled with Zelle, you can request Zelle payments from customers. To make payment requests, using the Zelle app or your mobile banking app, click on “Send Money” and toggle to “Request Money”. Then either select the account holder you’re requesting money from or click “add recipient” using the customer’s email address or phone number.  Enter the amount they owe you, review the transaction, and then hit “request”. You can also enter an optional note to help remind them what it is you’re requesting payment for or for your own categorizing system. 

You can also give the customer your business phone number or email address associated with your Zelle business account, the amount of money they owe you, and have them send it from their mobile device with. 

Pros and cons of using Zelle for business

As with any payment method, Zelle has some pros and cons.

Which banks offer Zelle for business accounts

Zelle claims that over 10,000 U.S. banks and credit unions offer the payment service. Some popular banks that incorporate Zelle include:

• Bank of America
• Capital One
• Citi Bank
• JP Morgan Chase
• Morgan Stanley
• PNC Bank
• USAA
• Wells Fargo

It’s important to read the disclosures to determine what limits Zelle has with your bank, including the number of transactions or amount of money you can transfer within a certain period of time. 

You can find out if your bank offers Zelle for business accounts here. 

Alternatives to Zelle

Zelle may not be the right payment solution for every small business, especially if you are going to be doing a large volume of transactions or want to provide payment protection for your customers. Some alternatives to Zelle include:

• Apple Pay
• Amazon Pay
• Google Pay
• PayPal
• Stripe
• Square
• Venmo

Each of these will have its own pros and cons, but it’s important to find the right payment processing solution for your small business. 

Frequently asked questions

How can I record Zelle transactions?

While Zelle transactions will be noted in your bank account, the transfers will not automatically be recorded in your bookkeeping. If you use accounting software like Quickbooks, you will need to manually record transactions made with Zelle. This is where the “optional note” function can come in handy. You can view all of your Zelle transactions in the Zelle app. 

Are business transactions secure with Zelle?

Yes, using Zelle transfer is secure and safe. However, there are no payment protections because there is no way to cancel a transaction. If a customer wants a refund or sends you the wrong amount of money, you would have to initiate another transaction to refund them or send or request the difference. There is also no way to formally dispute a transaction. 

Should I Zelle contractors?

Zelle can be a great way to pay contractors who are working for your small business. They will be happy to receive their payments quickly and without having to worry about cashing a check. However, you will need to make sure that your small business account has all the funds in it before sending the payment, because there is no way to cancel a transaction and the money is transferred immediately. 

Is Zelle free to use for small businesses?

Yes, Zelle is free for small businesses and personal accounts alike. 

Are there any restrictions using Zelle? 

Yes, Zelle has different transaction limits with each bank. Read your bank’s disclosures with Zelle to determine what those limits are. If your bank does not integrate directly with Zelle, you are limited to transferring $500 per week. 

Are there tax implications with the use of Zelle? 

Unlike Venmo or PayPal, Zelle does not report your transactions to the IRS. This means you will have to report this information yourself. 

Final verdict: Using Zelle for small business

If you aren’t doing a large number of transactions or a high volume of sales, Zelle can be a convenient payment option for your customers, vendors, and contractors. Getting cash into your business bank account fast using Zelle can help free up cash flow and help you keep track of payments. The convenience of offering the Zelle network for payments can give you a competitive edge over your competitors, too. 

If you’re looking for financing like small business loans or business credit cards, Nav can help you sort through the noise to find the best option for your business. Sign up for a free account today and see your options.