As you can see as a small business owner, technology has rapidly changed the way in which things get done. Customer’s are rarely using cash, having a mobile-friendly website is expected, and having some form of social media presence is pretty much a basic necessity now. With that being said, why haven’t we all fully embraced electronic payments?
ACH Payments have taken the lead as one of the most dominant electronic methods of payment. ACH payments are more efficient, safer and quicker than pulling out the old check book and manually writing a check. While not every vendor will be willing to accept electronic payments, making the transition to the vendors that you can is likely to save you some hassle and a few headaches.
Electronic payments are quicker & more cost efficient
When you have checks that you have issued and have yet to be cashed, completing your books can consume valuable time. You might reduce your account balance for your internal records, your bank account will not show the same reflection until the money is debited from your account. This can cause confusion, delay and will surely have a negative impact on your reconciliation process.
This issue can easily be avoided with electronic payments because you establish the fund settlement timing and you do not have to wait on the payee to take action. This approach simplifies cash forecasts and you can more efficiently manage your working capital.
Electronic payments typically cost a few cents, while paying by check could cost roughly $20.00 after you add in the cost of materials, postage, and preparation time. Check writing also consumes your most valuable commodity – Time! Printing checks, collecting signatures, creating the envelope and mailing it can suck up valuable hours. This is all valuable time that can be better utilized running your business.
Reduce the Opportunity for Fraud
Most of us have experienced some form of fraud and know that it is a complete drain on revenue for business owners. There is very little that we can do to stop these criminal fraudsters from pursuing criminal activity, we can protect ourselves by reducing and minimizing the amount of information that is exposed. One simple and basic ways is to minimize the amount of information that you send out, just like the information found on your written checks.
When you send a check through the mail, you risk exposure of your account number, routing number and signature(s). If your check is intercepted by one of these criminal fraudsters your account is likely compromised. Utilizing electronic payment methods drastically reduce your risk of fraud because sensitive information is much more protected.
Transitioning to an electronic payment system seems like a no-brainer, but unfortunately not all of your suppliers will be ready for the change. If you find that is the case, you should take extra precautions to protect your account and its sensitive information. You can engage your bank and they will assist you by implementing cash management services such as Positive Pay, and ACH debit filters. These tools decrease errors, reduce the risk of fraud, and increase efficiency improving your company financial health.
Positive Pay
Positive Pay is a great tool because it protects your account before you incur a loss. Utilizing this service, your bank is able to verify checks that are presented for payment against your approved check register. If a check is presented that is altered in any way, you will be notified from your bank with the details. At that time you will then have the ability to verify or return the check. All of this takes place before the payment is processed keeping your money secure.
ACH Debit Filters
While electronic payments are more secure than check payments, they are not immune from fraudulent activities. Criminals have the ability to easily attempt electronic fraud once they have obtained your account information. Fortunately, your bank can help combat this.
ACH Debit filters are a form of electronic fraud protection that notify you in advance if an unauthorized draft is attempting to clear your account. You will need to provide your bank with an approved vendor list and you will receive an alert for any unapproved debits. If you’re familiar with the transaction, you have the option of approving it and adding the vendor to your authorized list or giving the vendor a one-time clearance. If you’re unfamiliar with it, simply block it and let your bank take it from there
Making changes in the way that you do things is never easy, but implementing systems that are safer and more efficient will bring benefits to your bottom line. Consult with your banking professional about the various ways your financial institution can further assist you in protecting your money and your time.
Schedule a free no-obligation 30 minute call with one of our finance consultants and discover other ways that MCDA CCG Inc. can help you protect and improve your bottom line.