Digital transformation and technology are necessary for business success. In spite of gains in digital transformation, many departments — such as accounts payable (AP) and accounts receivable (AR) — still rely on paper-based processes to do their work. Many organizations use paper checks simply because it’s what they’ve always done, while other businesses avoid ePayments because of the fees.
However, paper checks aren’t an efficient way to run your business. If you want to fully embrace digital transformation, it’s time to automate your AP and AR processes with digital-friendly payment options. Let’s look at how paper checks work and why, in spite of the fees, online payment options are superior.
Using paper checks for AR and AP
If you shop at a grocery store or retailer, you likely won’t see everyday consumers paying with checks. That’s because checks account for just 7% of all consumer transactions.
Although consumers are eager to opt for digital payments, businesses have had a harder time letting go. Checks are still a very popular way for businesses to send and receive payments: in fact, 81% of businesses use paper checks at least occasionally. This is often because businesses are accustomed to paper checks, but also because some businesses (and even government agencies) still require paper checks.
Even though paper checks might not be avoidable in some cases, they shouldn’t be your business’ go-to option for making or receiving payments. Checks have so many downsides, including:
- Lack of security: Checks have your business’ bank account details on them. Anyone who gets their hands on the check could cash it or steal your bank account information, which can cause tremendous issues. Checks also open you up to a greater risk of fraud. Only 25% of check fraud cases are prosecuted, so it’s unlikely that the culprits will ever face justice. Meanwhile, check fraud costs businesses $18.7 billion every year.
- Time costs: Yes, checks are free to send, minus the cost of postage. But checks take a lot of time. Your team has to process the check, mail it, and wait for the other party’s bank to process it. All in all, it could take weeks for your check to clear. Plus, checks require more hands-on time from your employees, which costs you more in terms of labor and productivity.
- Opportunity cost: Relying on checks makes it much more difficult for your business to manage its cash flow. It’s impossible to get an up-to-date view of your business’ finances, which can make it difficult to take advantage of opportunities that come your way.
While checks don’t usually come with payment fees, the security risks, time loss, and opportunity costs make them an inefficient option for businesses.
The efficiencies of ePayment solutions
Paper checks are just too clunky and inefficient for modern businesses. ePayment solutions, on the other hand, allow organizations to:
- Accept multiple payment options: ePayment solutions allow businesses to receive payments more quickly. ePayments give businesses the ability to choose from multiple payment options, which often speeds up the entire process.
- Automate payments: You can’t really automate paper checks, but you can certainly automate ePayments. Automation not only saves time but it can also improve the accuracy of your payments, too.
- Improve security: Stop worrying about whether your paper checks made it in the mail. ePayments process securely in an encrypted online portal, which makes it much more difficult for scammers to steal your payment details.
Many organizations choose ACH deposits and virtual cards as solid alternatives to paper checks.
ACH deposits are also referred to as “electronic checks.” With ACH, you can initiate an electronic transfer from one bank to another. There’s no need to visit your physical bank or post office: intelligent AP software processes these ACH payments automatically. Plus, clients and vendors can save their payment information in your system, so they don’t need to re-enter their information in the future.
While ACH payments are convenient, they do have longer waiting periods than other ePayment options. On average, you can expect an ACH payment to take three business days. They often come with modest fees, which usually range from $1 to $50, depending on the amount deposited and how quickly you need it to process.
In spite of the fees and waiting period, ACH deposits are still faster and more secure than checks. Because they’re digitized, your accounting team can easily track their status online, which gives you more visibility and control over your finances.
Virtual cards work like traditional credit cards, but with one big difference: they exist only online. Your bank doesn’t print a physical card. Instead, it provides a card number, CVV, and expiration date digitally.
Some virtual cards allow you to generate new card details for every transaction. This makes it far more secure than a paper check, and even more secure than a traditional credit card. Even if scammers steal your card information, the single-use virtual card numbers are useless to them.
The downside to virtual cards is that you can’t use them to pay for goods in-person, so if you frequently make trips to Office Depot, you might want to opt for a physical card. But for making payments online, virtual cards are incredibly convenient and safe.
In terms of fees, they vary depending on the card you have. Like traditional credit cards, many virtual cards have fees ranging from 1.5% to 3% per transaction. Even so, virtual cards give the recipient immediate access to their funds, which cuts down on the time required to process payments.
ePayment fees are worth the benefits
Yes, ePayment options come with processing fees that you likely won’t pay for paper checks. However, the benefits outweigh the minimal costs of these fees. Checks aren’t “free,” either: they cost your business time, productivity, and security.
With solutions like DTI Payments Automation, AP departments can fully automate the AP process. Free up cash flow, improve payment transparency, and take advantage of vendor discounts for paying early. See how DTI can help you ditch paper checks for good: check out our Payments Automation solution now.