Some small businesses still believe paper checks are at the top of the payment hierarchy. Such beliefs exist more because those businesses haven't stayed up-to-date with the latest payment trends or tried any different payment methods in a long time. In this article, we'll dispel several myths about accepting paper check payments.
For any small business that's been accepting paper checks for years, the process can seem straightforward. That may be, but have you tried stepping back and looking at what goes into processing a paper check? There are quite a few steps:
- Open the envelope with checks
- Record payment against the customer's account
- Reconcile the check in the accounting system.
- File the check for storage.
The above steps don't take into account times when there's no customer signature; the check is filled out with the wrong amount, or to the wrong company. All add more time and labor cost.
Digital payments put the labor burden onto the customer. The customer must enter in its payment information. Once it is entered in and the customer clicks submit, the payment is processed and entered into your accounting system.
A paper check creates its own audit. Once the check is stored away, you just have to look it up by the customer's name. While that is true, what happens when things go wrong?
For example, the check is filed under the wrong customer, or the check is lost. Also, you can search by keyword for paper checks.
With digital payments, there is also an audit. Unlike paper checks, the software will match the payment to the right customer, assuming it is configured to do. Digital payments, also, can't get lost.
Yes - there is an upfront investment to processing eChecks, in addition to the fees charged per transaction and any monthly cost for the eCommerce platform. However, compared to the labor cost as mentioned in the first section, eChecks still come out far ahead. The cost to process an eCheck ranges from about $0.25 to $1.50. Consider that the entire process is automated. The customer inputs its payment information on your website and once submit is clicked,, the payment is processed and entered into your accounting system (assuming you have eCheck integration). eCheck processing will go on whether someone in the accounting department is sick or even quits.
Hacking is certainly a concern for any eCommerce platform. But, consider that it is extremely difficult to hack modern payment systems. Most hacking occurs not at the point of payment, but instead against stored information. If you have a reputable hosting provider that is using security best practices, there is little chance of being hacked.
Back to paper checks, many people consider them secure because they can’t be hacked. That isn’t true. A clever thief can modify a check. To untrained eyes, the check will pass as valid.
While we’re talking about security, many small businesses run into problems in their accounts receivable and payable departments because one person is controlling the entire process. Someone who is determined and knowledgeable, with malicious intent, has everything he/she needs to doctor documents and scrape small amounts of money from the company. Those small amounts add up to big amounts over time. With one person running the show, there’s little chance of them getting caught.
That’s why having at least two people in accounting is a good idea. Even better is if you are able periodically to rotate people into that role. Rotations will not only reduce fraud, but provide more reliability. If someone is out sick or quits, there’s another person ready to step in. eChecks lack the ability to be tampered. They are recorded into the system and verified at multiple points during the payment process.
While your customers may pay by check, are you sure that is their preferred payment method? Over the last ten years, payment by paper check has declined by more than half while digital payments have increased by about the same amount. Outdated thinking would lead you to believe that B2Bs only pay by paper check. That just isn’t true.
Also, consider that behind each business is a real person processing those payments. That person is also a consumer. Consumers certainly prefer to pay digitally rather than by paper check. That comes through in many businesses, as well, with a high preference for the convenience of digital payments.
Staff that is used to process paper checks will certainly be in for a change with eChecks. But, not all clients will pay digitally. Some will continue paying by paper check. This means your staff’s knowledge of processing paper checks will remain in use.
eChecks basically process themselves. Staff may still reconcile payments, but each eCheck entry already will be in the system. Overall, the training impact for processing eChecks is very minimal.