Taxation without representation!
That was the cry among colonists of what would become the United States of America. They believed the taxes that they paid England didn’t provide enough say in how things were run.
In short, the payback wasn’t adequate.
Businesses likely feel the same way about check payments for business-to-business transactions.
What Are Paper Checks Costing You
Compared to electronic payment alternatives, paper checks:
- Cost more
- Require more staff time
- Take longer to prepare
- Provide less tracking
- Result in more fraud
- Are more difficult to reconcile
Why are businesses willing to pay higher costs for a clearly inferior payment instrument?
The root of the problem is that determining the cost of paper checks can be challenging. Different businesses use different methods and calculations, research from the Association for Financial Professionals (AFP) finds. Often arbitrary values are used to calculate the costs of different payment methods. Some businesses don’t consider costs related to positive pay or escheatment tracking.
Nonetheless, the costs of paying suppliers via paper check are sobering. The median transaction cost to issue a check is between $2.01 and $4.00 per check. AFP pegs the median cost at $3.00 per check.
Consider this: 15 percent of organizations issue 20,000 or more checks per month. Using the median $3.00 cost per check issued, the total cost to issue 20,000 checks per month is $60,000.
That’s $720,000 per year!
Now consider that the median internal transaction cost (including personnel, service centers, IT, etc.) to pay suppliers via Automated Clearing House (ACH) is between $0.11 and $0.25 per payment.
And there is no cost to businesses to pay suppliers via a virtual card.
Eliminating the costs of paper checks may not sound revolutionary, but it is a first step towards transforming your accounts payable department from a cost center into a profit center.
Tired of getting little in return for the high costs of paper checks?
Speak with one of our payments experts to learn how you can migrate to electronic payments.
Interested in other vender payment methods? Check out this article on How ACH Differs from Other Payment Methods,