Cheques Are An Expensive Burden On Your Business
Running a successful business comes down to keeping expenses low, profits high, meeting deadlines, and having happy employees (which, in turn, leads to happy consumers). One of the biggest ways to meet all of these goals is by getting rid of your cheque-based payment system.
Reports show that cheques can account for 25 percent of outgoing payments from small businesses, sole proprietorships, partnerships, and charities. This is a massive amount of time and money that is going to waste, and people are starting to take notice.
A Federal Reserve study of the payments system in 2013 documented the decline of cheques. From 2000 to 2012, the number of cheques paid declined by more than 50 percent as payments through cards, direct deposit and other services more than tripled. In 2004, 81 percent of businesses used cheques for business-to-business payments. By 2007, that number fell to 74 percent. In 2016, the number was down to only 51 percent. Why have businesses stopped using cheques?
It costs money.
In-house payment operations incur heavy costs as a result of the multiple steps required to create and send out cheques. Studies have shown that creating a cheque costs $0.82 vs. $0.13 for electronics payments. HR management software company PaySavvy determined the total cost of issuing one cheque is $17 when you take into account secondary costs. Secondary costs include bank fees for issuing cheques, fraud protection, cheque reconciliation services, retrieval of transaction history and cheque images. Businesses also incur additional expenses for supplies and equipment such as magnetic ink character recognition (MICR) printers, envelopes, postage, supplies, and more. All of these costs add up, and can prove extremely costly for industries that produce and distribute a large number of cheques.
It takes time.
It also takes a significant amount of time to create, process, and send out cheques to employees. Paying an employee by cheque can sometimes take days. Banks can also place holds on cheques, limiting the employee to only a portion of their wages. This becomes an even bigger issue when dealing with employees who work on the other side of the country or world, work freelance, or are unbanked. It’s also a pain for other businesses you are trying to pay. They’ve provided a service and now they have to wait for the cheque to arrive and travel to a bank to cash it, which may cost them money, as well as the delay of funds. An unhappy, unpaid workforce and unhappy business partners are not going to help your business succeed.
Let’s compare a cheque versus sending an electronic payment via prepaid.
1. Instantly transfer money onto employees’ prepaid cards. Real-time reporting. No NSF or stop payments.
1. Bank Fees. Cost to Issue Cheques. Bookkeeping.
2. Ordering of Security Cheque Paper. Printing of Cheque.
3. Manually Organizing and Signing Individual Cheques.
4. Prepare for Pick-up or Manual Distribution of Cheques
5. Possibility of NSF and Stop Payments Costs
Payments can be sent out to prepaid cards almost instantly, and payments can be made as often as required. Employees can then use the funds to make purchases anywhere that credit cards are accepted, including online, offering advantages that you won’t find in traditional banking or cash-based systems.
Electronic payments are far more secure than cheques.
Prepaid cards greatly reduce the security risks related to cash and cheque fraud. Losing a payment via cheque is a real danger, but with prepaid that will never happen. Most prepaid cards have protection against lost cards, theft, and unauthorized transactions, so if your card is stolen you aren’t at risk of losing funds or damaging your credit. If an employee loses their card, they can easily reapply for a replacement, and the card balance stays the same. As well, all data is encrypted and totally confidential.
It can hurt your business cashflow.
It’s never clear when a cheque that you sent out by mail will arrive, when someone will cash it, or when it will clear in the bank. This can cause serious cashflow problems, especially for small businesses. With prepaid, you know when the money has been sent out, and when it has been received.