Whether you are banking as a consumer or as the CFO of a multi-national company, you have probably noticed the prominent role ACH (automated clearing house) is playing in business payments. This is not a completely new process; after all, over the last twenty years, ‘direct deposit’ has become routine with many large employers. Today, consumers pay the majority of their bills using direct payment via ACH, so why are businesses still cutting countless checks?
Advancing technology, rising costs, and a rapidly evolving competition pushes companies to seek best practices for every facet of business, and taking care of finances is one of the most necessary. Below are five reasons why you should eliminate paper checks and consider paying vendors via ACH payment processing
Fraud is one of the biggest threats to the banking industry, and cutting checks manually and sending them through the mail exposes both the payer and the payee to unnecessary risk of fraud. Electronic ACH payments dramatically diminishes this risk, since banks and credit card companies have begun issuing cards enhanced with embedded chips (in addition to magnetic strips) to combat fraud.
Cost of Processing
Many businesses still pay their bills by check, disregarding the additional costs of delivering, printing, writing and mailing checks over time. If you include the employee time invested in this drawn-out payment process, it is an even bigger waste of time and money. ACH payments serve the exact same purpose, but eliminate all the other additional costs and fees. The rates for an ACH payment processing is significantly lower than a regular check payment, and this reason alone makes it worth the switch.
Cash Flow and Access to Funds
Profit is important, but cash is king. Another solids reason for utilizing ACH payments is improved cash flower and error prevention. Cash management of receivables and payables is a critical function of business, and ACH payments can reduce the delay in access to funds by 7-10 cases in most cases, with ACH payments often taking 24 hours or less. In addition, ACH payments require less human oversight, which reduces the possibility of error.
Speed and Tracking
The speed of ACH processing dramatically reduces the time when neither the payer nor payee has access to the money being transferred. In addition to quicker execution, tracking of payments is much easier with ACH. A summary of the inflow and outflow of cash can be received weekly in an email, and this accurate data gives CFOs better, more up-to-date data, which can make all the difference in time-sensitive decisions that can impact the company in a positive way.
Best Practices in Technology
Technology is a huge aspect of every business these days. The only constant is that it will alter and effect how we conduct business every year. Acknowledging and embracing this fact will not only help your company survive, but thrive. Alternatively, ignoring it may lead losing out to your competition or going out of business altogether. Whether we like it or not, banks are forcing this change through systems and services which are pushing us towards electronic payment processing. If we adopt these progressions and integrate them into our business processes, it will limit dangerous exposure. The longer you wait to make this shift, the more difficult it will be to catch up.
It is clear that the cost of cutting a check versus ACH payment is reason enough to adopt this strategy for your company, and the other reasons listed above make it an obvious choice. If you implement this payment process, you will have a sound strategy that can provide real savings to your business.