From communication to entertainment to monitoring health to doing business, we live in an era where digital technology encompasses almost all areas of our lives. Digital connectivity has not only become increasingly common but it has revolutionized and empowered people’s lives in multiple ways. Consumer expectations and behaviour have also undergone sharp transformations owing to digitization’s rapid and ever-expanding influence over the years. And keeping pace with this, business establishments and marketers have been swift to replace traditional methods and fundamental operational aspects with digital alternatives.
The digital transition has altered how businesses and companies are handling payments, particularly in the B2B space, in gig economies and for individual consumer payments. Adoption of e-payment systems have witnessed a significant hike over the years and the 2019 Federal Reserve Payments Study stated that,
- ACH payments grew 6.0 percent per year between 2015 and 2018.
- Check payments fell 7.2 percent per year from 2015 to 2018
However, many companies, SMBs and processes like insurance claims payments are still reliant on paper checks. But with 2020’s global lockdown bringing life to a complete standstill, it’s obvious that moving to digital disbursements is no longer a choice but a necessity.
Cost of Issuing Paper Checks Is More
In simple words, if you’re using paper checks then you’re paying higher than the rest. The various hard costs that come with issuing checks including printing, processing, postage, bank charges, mailing charges, etc. means you end up losing a significant amount of money that can be avoided by moving to electronic payments.
Inconvenient and Risky
From issuing to approving to depositing to waiting for clearance, paper check payments are a time-consuming process and can be quite inconvenient for both employers and employees. Additionally, glitches like manual errors leading to a bounced check or the risk of check frauds or losing a check (it contains a lot of sensitive information) make this payment system not just cumbersome but risky too.
Cost for Handling Stops/Voids/Re-Issue
Whether you have to cancel a check or initiate a stop payment, the related cost for issuing any of these requests is an additional expense that can be avoided by switching to a more reliable and cost-efficient method like e-payment. Banks can charge anywhere between $15 – $35 for a stop request depending on the type of agreement your organization has with a particular financial institution. Additionally, the amount of time and work that goes into sorting the matter is another obligation that you’d rather do without.
Affects Short Term Cash Flow
Switching to electronic can be valuable especially for SMBs because of the impact faster payment processing has on a company’s cash flow. Fast and real-time payments enable quicker and more accurate accessibility of crucial financial data like cash position. This helps in streamlining many aspects of your business operations and also prevents disruption in significant relations and functions.
Cost of Check Escheatment
Unless you’re already familiar with it, escheatment is another complicated issue related to checks that you’d definitely want to avoid. Just like any other unclaimed property, uncashed checks (vendor, contractor or payroll checks as well as stockholder’s dividend checks or even stale checks received by you) become a state property and inevitably are included under escheat laws. Not only is this an unsought liability but it adds the significant cost of expensive penalties and interests.
Cost for Print Fulfilment Services
Checks can be printed depending on your company requirements and since a variety of aspects need to be considered such as including personalized specifications, holograms, security features, etc. are offered by different providers. Check printing services involve time, labor as well as resources, and needless to say, all of these cost money.
Changing times bring their own demands and with today’s availability of digital solutions, businesses are realizing the importance of switching their payment methods to fast, reliable, efficient and cost-effective alternatives. In most cases, e-payment systems are the most viable for both large and small enterprises due to the many benefits they offer, and more importantly, for helping drive your business forward by filling some significant gaps.
Want to know more about digital disbursement solutions suitable for your business? Contact us for a more detailed discussion.
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