Business Checks have been around for decades, and – not that long ago – made up 86% of all non-cash payments. But times have changed. Although online payments now make up a majority of non-cash transactions, business checks still make up a significant portion of payments within the US.
In fact, in 2015, The Federal Reserve’s research disproved the idea that business checks are no longer relevant. Based on their study – which is conducted every 3 years – roughly 20 billion checks continued to be written each year, conveying over $22 trillion in value – second only to the ACH network among all payment instruments.
By comparison, credit and debitcards support $3 trillion and $2 trillion of value, respectively. Despite ongoing declines, business checks still remain an integral component in the overall US payments mix. The question is – why??
For starters, I’ll give you 7 of them.
REASON #1 – It’s Faster & Easier to Pay Bills Online Than Writing a Business Check
The process of writing business checks has gotten easier over the last century. With integration into common accounting software platforms such as QuickBooks, you can print checks automatically instead of having to sit down and hand write every single business check.
But there’s still a LOT more work required to create and mail a business check than there is with an online payment.
Let’s take a Deluxe eCheck for example. The process is as follows:
- Fill out the details of your check (or let QuickBooks do it for you)
- Hit Send
Compare that with Paper Business Checks
- Fill out the details of your check (or let QuickBooks do it for you)
- Check the printer to make sure that the specialty check stock is loaded correctly
- Hit Print
- Collect the checks
- Sign them (or have them signed)
- Fold and stuff them into specialty check envelopes
- Seal & stamp the envelope
- Bring the checks to the post office
- Follow up to make sure that the payment arrived on time
Now, imagine the Paper Business Checks example with the following additional hurdles:
A. You’re Out of Business Checks!
You go to print the business checks and realize that you’ve run out (or don’t have enough to cover all of the checks you’re about to print). With online payment methods, you never have to worry about running out of checks, because there is no need to keep an inventory of paper checks on hand.
B. You’re Out of the Office!
You are away from the office and realize that you forgot to send a critical vendor payment before you locked the checkbook into your office filing cabinet and left. With electronic payments, you can process a bill anywhere, at any time, as long as you have access to the Internet.
C. A Payment Needs To Arrive Tomorrow!
Rush payments are a frustrating and expensive part of accounts payable. If you have an urgent order to process with a supplier, but they won’t release the order because the check you sent to cover the last invoice hasn’t been received yet (it’s still in the mail). Online payments can arrive as quickly as an email.
Imagine how much easier life would be if you could simply type a few letters on the keyboard, click the mouse (or tap the screen on your mobile device) a couple of times and BOOM… that payment has been sent, received and you’re ready to move on.
REASON #2 – It’s Cheaper to Pay Bills Online Than Writing a Business Check
Electronic payment methods significantly reduce the cost associated with paper business checks. This includes the hard costs (specialty check stock, envelopes, stamps) and the soft costs (printing, folding, stuffing, mailing, tracking).
Industry stats have shown that issuing paper checks is TEN TIMES more costly to a business than making electronic payments. In fact, according to multiple industry studies, the high cost of checks is the primary reason nearly 80% of businesses are transitioning away from paper checks.
Businesses have estimated that the cost to print, send, and track a paper business check ranges from as little as $1 to as much as $26 PER CHECK, with the average cost falling at $5.91 per check. Bank of America gives another estimate that a business check can cost between $4 to $20 dollars. While the Aberdeen Group reports an average cost of a check payment to be $7.78.
Another added cost stems from the unpredictability of postal services delivery. If you find yourself paying:
- rush delivery fees
- overdraft fees when a payment processes earlier than you had planned
- stop payment fees for business checks that get lost in the mail
- or all of the other associated costs with paper checks
Consider paying more often using online payment methods where you can better time and control the ins and outs of your available funds.
REASON #3 – Online Payments Provide Improved Control over Business Cash-flow
Speaking of better control, cash flow management is another key advantage of online payment methods. Deluxe eChecks & ACH both allow you to time when you send the payment, knowing that it will arrive quickly, often within seconds. This can be used to pay at the last possible moment, to reduce check float, or can be used to make sure you hit early payment deadlines to receive appropriate invoice discounts.
Receiving AND Sending payments through electronic means is even better, because then you can control – down to the penny – the inflow and outflow of cash from your account without having to worry about delays with payments coming in or going out.
REASON #4 – No More Carrying Around Paper Business Checks
This may feel like an obvious benefit, but there are some subtleties as to WHY this is a benefit to your business.
If you use online payments, you can stop carrying your checkbook around. For some businesses, this means not having to carry around several – sometimes dozens – of checkbooks.
Take a property management company as an example. Many are forced to keep and carry distinct checbooks for each property that they manage in order to maintain separation of controls. Or an insurance adjuster, who may need to bring check stock and a miniature printer with them in case they need to issue an advance on the insurance claim to help a family in dire need.
Carrying these checkbook means extra bulk and extra risk. If the checkbook is lost, you must immediately inform the bank and keep a watchful eye out for fraud. Worst case scenario, you’ll need to change accounts and reorder all of your checks.
But you don’t even need to carry the checkbook with you to expose your business to that risk. Blank, MICR encoded checks are often left in an office, sometimes poorly guarded. A skilled thief can easily “lift” a few checks at a time, and use them when nobody is looking.
An even more dangerous scenario is when your delegated signing authority is leaving for vacation and often leaves blank, SIGNED checks available in case of emergency.
With online payment methods, none of that is required as electronic payments can be sent from anywhere in the world (providing that internet services are available).
REASON #5 – Better Usage of Check Float with Less Risk of Check Fraud
Let’s be honest. Despite their motto, the USPS can be quite unreliable. Sometimes that check you sent will arrive with lightening speed, other times it will seem to crawl through the system, arriving days – even weeks – later.
Early and late arrival of check payments can cause problems with your bank accounts and end up putting your business into a precarious position.
Sometimes those business checks get completely lost. And a lost business check can be dangerous for two reasons:
- Your account information, which is at the bottom of every single paper check you send, can end up in the wrong hands.
- The lost check can end up being found weeks or months later, long after the replacement has already been sent and cashed
Beyond the dangers of check fraud, there is also the benefits of check float.
Check float refers to the amount of time it takes for funds to be removed from your account after the business check has been sent. This gap – which is unique to check payments – is significant because during this time the funds can be treated as if they are in two places simultaneously… still in your business checking account and in the recipient’s possession.
When you make a payment with a check, the funds don’t leave your account immediately when you write the check. Even after the funds have been received, and your invoice has been marked as PAID by the vendor, it takes time for the check to be deposited and for the funds to be deducted from your account. This often allows the business several days of “float time” in their accounts.
However, the unpredictability of mailing services and processing can be a challenge to manage.
With online payments, you know exactly when the payment is sent and have much better control over when it will be received. Although you may have less “Check Float” you have more “Pre-Check Float” time where you can keep the money in your account while the paper check would have been making its way through the mail.
Also keep in mind that there is a very fine line between Check Float and Check Kiting, the latter being a form of check fraud.
REASON #6 – No Need To Manage Business Check Inventory
In order to write paper business checks, you need to have paper business checks on hand. This means having to keep an eye on your stockpile of business checks that you currently have available and ordering more when you start to run low.
This not only adds additional cost to the process, but is yet another thing that you have to manage when running a business. Online payments don’t require you to keep anything on hand, and you can access the payment options when, how, and if you need them – providing you with greater flexibility and one less mundane task to deal with.
REASON #7 – Online Payment Methods Are More Environmentally Friendly Than Business Checks
As a business, you can easily reduce your carbon footprint by sending online payments. Not only does this reduce the amount of paper your business will consume, but eliminating the need to deliver checks by mail or courier will lead to reduced emissions from delivery vehicles.
Some payment methods, such as ACH, nearly eliminate the need for paper. Others, such as Deluxe eChecks, still need to be printed, but do not need specialty check stock that has to be printed an shipped to you, and then printed again and mailed out to the recipient.
It may not seem like a lot, but when you consider the 20 billion checks that are written each year, these small changes can add up quickly.
Whether you want to completely change your payment processes and switch over to ACH, or if you want to continue using the core system behind a business check but just change the delivery method using Deluxe eChecks, there are many reasons to switch from the old-fashioned paper check over to something more cost and time efficient.
Imagine what you could do with all of that extra time and money?