The modern business environment has grown increasingly competitive. Business leaders constantly seek new ways to cut costs and boost profits without sacrificing operational efficiency and security. One area where companies may look for cost-saving opportunities is in their payment processing practices.
Businesses that have relied on check payments for decades may start to wonder if switching to electronic payments is a better alternative. Below, we’ll compare these two payment methods to help you understand the costs and benefits of each.
The Case for Checks
Business checks have long been utilized by companies to pay vendor invoices and bills and receive payments from customers. According to a recent survey by the Association for Financial Professionals (AFP), 30% of organizations in the U.S. and Canada still receive customer payments via check, and 26% pay their suppliers with checks.
Businesses continue to use checks for a number of reasons, including the paper trail they leave. This makes it easier to track payments and maintain accurate financial records.
In addition, checks also do not require internet access, making them reliable in situations where online systems may be down. For this reason, having payroll and multipurpose checks on hand is a smart move to ensure companies can initiate payments on their own terms.
The Case for Electronic Payments
Electronic payments have grown in popularity over the years, primarily because they are processed faster than checks. In fact, in the same AFP survey cited above, 54% of respondents say payment speed is a significant driver of digital payment adoption.
Also, electronic payments can be automated more easily and set up for recurring bills, helping accounts payable and accounts receivable teams spend less time manually processing or writing checks.
Which Is More Cost-Effective?
Both checks and electronic payments have unique advantages, but how do they compare in terms of costs?
Businesses using digital payments can avoid the paper, printing, and postage costs associated with check payments. Also, automated electronic payments can help improve operational efficiency, which can promote cost savings over time.
However, the initial setup for electronic payment systems and ongoing maintenance can be costly. Plus, businesses that only accept electronic transactions may face outages and potentially lose revenue if their system is down and they cannot accept customer payments. The same goes for outgoing payments to vendors, suppliers, and employees. If the company can’t pay, it may incur late penalties and fees.
The Bottom Line
It is imperative that successful businesses should have both electronic and check payment systems in place. Electronic payments offer clear advantages when it comes to speed and automation. However, checks appeal to customers who may not be comfortable or familiar with electronic payments, and play a huge role in the midst of tech outages that could impact the ability to process or receive payments. Both options provide significant benefits for businesses.
Checks provide a certain level of security and control that many businesses seek. This is especially true for high-value transactions or large purchases, where the paper trail that checks produce offers excellent transparency.
Businesses that rely on check payments are also not dependent on technology and can continue making and receiving payments even if their systems are offline. This low-tech approach is much more straightforward, though businesses can still offer a professional look with laser checks that they can customize with their own logo.