Cut the time and cost of paper-based payments for your non-retail business with these faster and easier digital alternatives.
Consumers use some form of electronic payment—whether it’s a credit card, digital wallet, or an automatic withdrawal—in 67 percent of all transactions. But at the office, you might still be signing and sending paper checks to your vendors. If so, you’re certainly not alone, since 64 percent of business-to-business firms still use paper invoices and checks.
The Downsides of Paper
Now that digital systems have been in use for many years, it’s much easier to make a paper versus digital comparison. Consider these key issues as you make your choice:
- Overhead. Though estimates vary widely, a typical invoice can cost $6 to $17 to process. Costs include labor, postage, and printing
- Clearing time. A check takes ten days to process
- Accountability. Paper invoices and checks can be lost, with no foolproof way to locate them
- Security issues. Paper checks are vulnerable to theft at many points in their transit and processing
- Natural resources. Check printing drains paper and other natural resources
Leveraging the ACH Advantage
While the downsides of paper are clear, the overall news is good: Your bank’s Automated Clearing House (ACH)–based payment-processing solutions hit paper’s limitations head on. Consider these ACH–based pluses:
- Reduced transaction cost. Per-transaction fees vary, depending upon institution. Total median cost is about $4.50, including fees for both sender and recipient
- Faster processing. ACH¬–based payments clear in two to three days (sometimes less) with same-day ACH also available
- Digital tracking and security. You can locate payments easily throughout the transaction process. And though security threats are real, the system can identify and prevent a potential breech
- Stronger relationships. A faster and more reliable payment system fosters positive relationships with your vendors and contractors
Which paperless solution is right for you?
Bank-offered digital payment systems are adaptable to your business needs.
ACH and Same-Day ACH payment services are the digital gold standard for payroll and other essential recurring business payments. Same-Day ACH, introduced in 2017, is a fast-growing e-payment alternative. According to Nacha, which runs the ACH, its usage increased 192% from 2017 to 2018. For either ACH service, the sender must first get the recipient’s account number and bank routing number, along with other basic contact information. In most cases, transactions are subject to monthly and per-fee charges.
Real-Time Payments (RTP) is a new payment method launched recently by The Clearing House (TCH) bank consortium. It improves upon both Same-Day ACH and wire-transfer payments by offering businesses immediate clearance in 15 seconds or less. You can start a transaction 24 hours per day and seven days per week on amounts up to $25,000. RTPs promote transparency and liquidity, while also offering messaging options, including Request for Payment, in which you can send an invoice to a customer, and Payment Acknowledgement.
Another payment method on the horizon for businesses is the ACH–based Zelle e-payment system. This extremely flexible and user-friendly system lets you set up a payment using the recipient’s e-mail address or cell-phone number. Zelle is already a consumer-payments mainstay as both a stand-alone app and through more than 5,000 financial institutions.
Want more information?
Talk with your business banking specialist about your organization’s particular transaction needs. Their expertise can save time in helping you to find the solution(s) that will save you time, reduce errors, and create stronger relationships with your vendor and business partners.
This article is for informational purposes only. It is not designed or intended to provide financial, tax, legal, investment, accounting, or other professional advice since such advice always requires consideration of individual circumstances. Please consult with the professionals of your choice to discuss your situation.