These days, consumers and companies of all sizes alike have a wide variety of payment options available to them for everything from buying products they need to making sure all their bills are paid on time and in full. But while many Americans have, in their personal lives, switched to automatic payments or even use their smartphones to make everyday purchases, it seems that many small businesses in particular are still writing checks, and doing so may end up being extremely costly.
A recent poll from the Association of Financial Professionals found that roughly half of all small businesses are still writing checks and mailing them to the companies they have to pay for goods or services, and while that number is down from 74 percent seven years ago, it’s still fairly substantial, according to a report from the Wall Street Journal. For many, it seems as though the companies simply enjoy the familiarity they have with mailing checks, and that this is the way they’ve been paying bills for so long that other options just don’t seem as attractive, or worth the switch.
However, data from Bank of America shows that the cost of writing a check is actually sizable, and each one could significantly affect a smaller company’s bottom line, the report said. Based on the price of paying for the check itself, and for postage, plus the payroll costs associated with “writing, mailing, collecting and reconciling” the document, the actual cost to a company for each check can range from anywhere between $4 and $20. As such, a 2010 study by MineralTree found that issuing and depositing checks alone costs companies – of all sizes – nationwide between $26 billion and $54 billion annually.
So what can be done?
In the past several months, this problem seems to have come to a head, and prompted the Federal Reserve Board to ask the public for suggestions about how to increase the number of electronic payments being made by companies nationwide, the report said. By simply allowing banks to accept checks electronically back in 2003, use of the payment channel allowed companies to save some $1.6 billion in 2010.
Owners looking to cut company costs overall, of course, will have to do more than stop using checks. That could include finding more affordable small business insurance coverage, like liability insurance, which could help them to save as much as a few thousand dollars per year.
