Why Tearing up Paper Checks could be the Best Thing You Do for Your Business.
There’s no denying that the payment world has gone digital. From personal purchases like online shopping to paying for dinner with friends, we don’t think twice about making digital payments these days. For many, however, our business lives have not yet caught up with our personal lives. While online business payments are on the rise, many companies still pay by paper check even though it takes longer and costs more.
There are multiple reasons why businesses still pay by paper checks. Some companies often feel a sense of security with a paper check in hand and think of it as guaranteed money. Others may not understand how digital business payments work or worry the payment will not be posted correctly in the absence of the check stub. Naturally, those that do not understand how digital business payments work tend to embrace the motto, “if it isn’t broken, don’t fix it.” But there may be more “broken” than you realize. Here are just a few ways that digital payments can benefit businesses of all sizes and how you can get started.
Five Benefits of Digital Business Payments
Digital business payments save you time. It is much faster for you to make a digital payment than to process paper checks. Think of the labor involved with reviewing and approving a bill, cutting a check, getting it signed, and mailing it with the correct invoice. The process can take some companies several days or weeks to complete. A digital payment moves the entire cycle to the cloud. A long, complicated process is cut down to a few auditable clicks. In fact, digital payment solutions can cut the time associated with bill payment by 50 percent. Businesses can also get paid digitally two to three times faster than check-based payments.
Digital business payments give you more control. Imagine being able to track every step of a paper check payment, including each person who touches it within the company and outside of it — every postal worker, everyone at the vendor’s office, even the teller at the bank where it’s deposited. Then imagine knowing the exact moment the paper check will be cashed. That’s impossible for a paper check, but that’s exactly what you get with online payments. You select when the money leaves your bank account. The entire process is completely trackable from payer to payee. At any moment, you can determine the status of that payment.
There’s no guesswork, only precise documentation of bill review, payment and receipt. Bonus: This control supports healthy cash flow management. You’re no longer guessing when a check might be cashed or trying to keep track of outstanding payments.
Digital business payments offer much more information than paper checks. While a check gives you an amount and date, the payee, and memos/notes, a digital payment gives you all the remittance information of the transaction, including invoice numbers, exact date and time stamping. The audit trail will show who approved the payment and who made the payment. Finally, digital payments can automatically sync with accounting software, so information is never entered twice. This transparency makes paying and reconciling payments much simpler and faster.
Digital business payments bring more convenience. With online payment solutions, you can pay electronically from anywhere you have internet access. On the road for work? You can review a bill, payment history or vendor contracts while on-the-go, or use your smartphone to pay a vendor while you wait for your flight. Payments won’t be held up, protecting your company from late fees and disgruntled vendors. Accepting digital payments is easier as well, since incoming payments can be deposited directly into your bank account.
- Digital payments protect your business. Cloud-based bill pay solutions offer an additional level of oversight. Automated digital payment workflows, reinforced by the solution, ensure that the appropriate parties review and approve bills before they can even be submitted for payment. No more paper check fraud and theft of bank account or routing numbers. Plus, every step of the review and approval process is automatically documented in audit-ready trails.
Types of Digital Business Payments
When it comes to digital payments, lots of terms and combinations of letters are loosely thrown around, but less often explained. These small business payment options are plentiful and include:
Credit cards. Credit card payments have been around for years and are probably the most familiar form of electronic business payments. Credit cards provide one of the fastest payment options, but also one of the most expensive options for the receiver.
EFT. EFT stands for electronic funds transfer, which is just what it sounds like — transferring funds electronically from one bank to another without any paper money changing hands. EFT payments include many types of financial transfers including direct deposits (like payroll), debit payments, wire transfers and ACH payments.
ACH. ACH payments are digital payments made through the Automated Clearing House network, a centralized system for bank-to-bank transfers. A typical ACH transfer takes anywhere from a few hours to a few days to clear. These are faster and involve less manual labor than paper checks and incur lower fees than credit cards.
eChecks. An eCheck is simply the electronic version of a paper check, which causes a bank-to-bank transfer of funds via the ACH network. Funds may take 2-5 days to clear.
- Virtual cards. A virtual card is a 16-digit one-time-use credit card token that functions as a proxy for a physical credit card with a perpetual number. Virtual cards offer a layer of comfort with card payments because the card number/token can be used only once, and it also specifies the amount of the payment and expiration date. It is typically distributed to the vendor via an email, which can also contain relevant remittance information about the invoices being paid.
Now that you’re up to speed on digital business payments, let’s explore how you can start using them in your business.