How Much is it Costing Your Business to Accept Paper Checks?
How Much is it Costing Your Business to Accept Paper Checks?
Mar 17, 2023 by Zazil Martinez
Paper checks are one of the most costly ways to collect payments. Still, many businesses think getting paid by check is the most affordable method. In 2021, 91% of organizations across the U.S. continued to receive checks, even though they understand the associated costs and risks. Of course, there are also many indirect costs to check processing, such as labor and processing fees. The bill can quickly eat into your bottom line — and that's before potential errors.
It's no wonder businesses have been shifting from paper checks to digital alternatives that offer more convenience, data, control, and automation. The 2020 pandemic only accelerated the shift as consumers demanded contactless payments.
Ditching paper-based payment methods can help companies cut costs by reducing the amount of manual work and payment fraud risk. In most cases, the solution will integrate with your ERP, making it easy for AR teams to navigate.
Let's explore what it costs your business to accept paper checks and alternative payment options.
The Real Cost of Writing Paper Checks
Paper checks are 10x more expensive for businesses than digital payments as there are more than processing fees to consider, such as workforce and incidental costs, which are not included when processing payments via digital alternatives.
Based on the check price and postage, Bank of America estimates that a check can cost anywhere from $4 to $20. That's without considering the time your finance team spends writing, mailing, collecting, and reconciling checks. The Wall Street Journal reports businesses can spend up to $25k on materials, staffing, postage, and bank fees.
We ran the numbers to have a better idea of what this looks like in practice. Here's a breakdown of what it would cost your business to process an average of 5,000 checks per month:
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And from an AR perspective, if some of those checks bounce, things can turn ugly pretty fast. If you deposit a check that bounces, you can add in a returned check fee along with the headache of collecting the money you're due.
Processing paper checks is more than just expensive. It also slows your payment processing workflow down. This can increase your DSO and impact your cash flow.
These manual processes are no longer necessary thanks to digital payment solutions. With ERP integration, you can receive payments in minutes. The best part? Depending on your payment solution, you won't have to pay any transaction fees.
5 Common Payment Myths About Accepting Paper Checks
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https://www.paystand.com/blog/how-much-does-it-cost-business-to-accept-paper-checks