Whether you have recently done some financial transactions as a consumer, or you are the CFO of an organization, you have possibly noticed that ACH is in a much more prominent role with regards to business payments. This is really not something new – widespread use of ‘direct deposit’ has became more commonplace as opposed to twenty years ago by many larger employers. Today, consumers pay a lot of their bills each year using direct payment via ACH, also known as an automated clearinghouse. So why are organizations still cutting so many checks? As technology advances, costs rise, and in the face of rapidly evolving competition, adopting best practices in every area of corporation is a necessity. Taking care of your company’s finances is one of those areas.
Below are five reasons why you should pay vendors via ACH and eliminate the need for paper checks altogether:
One of the biggest threats in the banking industry is fraud and it continues to grow. As a result, banks and credit card companies issue new cards with magnetic strips and embedded computer chips to combat this rising phenomenon. Further, attacks to gain financial information are not just limited to hacking servers. They can also be done via social engineering techniques or impersonation, such as with invoice frauds. Companies often choose to get more information here and implement robust measures to prevent such fraud. In any case, it is of utmost importance to consider the security of any and all financial transactions, regardless of the amount and method.
Manual check writing and sending them through the post exposes both the payer and payee to unnecessary amounts of risk. Use of ACH payment processing dramatically reduces this risk.
- Cost of Processing
A number of businesses still pay their bills by check. The costs of printing, writing, delivering and mailing checks add up to a significant amount over time. It is an enormous waste of money and time when you also include the employee time invested in this payment process. ACH payments accomplish the exact purpose while completely eliminating such hefty costs as the fees of an ACH payment is calculably lower than the traditional check payment method. This reason alone justifies the switch.
- Cash Flow and Access to Funds
Profit may be important, but cash remains king. Managing cash flow and timing receivables and payables is a crucial function of any accounting department. Direct access to funds differs greatly with ACH payments vs paper checks. It is the difference between a week to 10 days in some cases, and just 24 hours or less. As with many things, when humans are involved, the possibility of oversight, input error, and general mistakes arise. This makes improving flow and access to funds while limiting mistakes another solid reason to use ACH.
- Speed and Tracking
During a transaction, there is a period of time where neither the payee nor the payer has access to the funds. Using ACH payment processor, the time is dramatically reduced, for this lag is never beneficial for either party. Also, tracking of payments is made much easier when the ACH process is used. Inflow and outflow of cash can be reported by email summary on a weekly basis. Better and more accurate data grants you as the CFO improved information to make appropriate decisions that can impact the organisation in a positive way.
- Best Practices in Technology
In this day and age, technology plays an enormous factor in every business. The only constant that we can count on is that it will change how we do business every year. If you are to embrace this fact, it can help your company to survive. Conversely, ignoring this fact may lead to risk of losing ground or even ceasing operations due to lacking a competitive edge. Financial institutions are forcing this change upon us all whether we like it or not. Their systems and services are propelling us towards more electronic payment processing systems every day. It limits their liability as well as ours if we adopt it and integrate into our company processes. This is inevitable and will become more painful it will be when the time comes that you are forced to make the change.
The cost saved from cutting a check versus making an ACH payment is reason enough to adopt this more efficient strategy in your company. In addition to the other reasons listed above, and you have a compelling strategy that can provide real savings to your business.
Please visit www.ach-pay.com to learn more about how ACH payments can help your business.