Checks have long been a popular and universally accepted form of payment, especially in the B2B market. Like most paper products, however, checks are marching toward extinction. The Association for Financial Professionals (AFP) reported that just 33 percent of B2B payments in the United States and Canada were made by check in 2022.
While business owners like yourself aren’t too keen on taking away a type of payment, over time it is inevitable. It’s also important to note that checks pose serious security risks, can create inefficiencies in your accounts receivable (AR) process, and suppress growth by putting a crimp in your cash flow.
Better options are available, such as debit and credit cards or digital transfers made through the Automated Clearing House (ACH) network. Here are five reasons why B2B companies should reduce the amount of checks they accept from customers:
1. Risk of check fraud
Check usage may be declining but check fraud is rampant and growing faster than any other form of financial deceit. The Financial Crimes Enforcement Network, a unit of the United States Treasury Dept., reported nearly 460,000 cases of check fraud in 2022, up from the approximately 250,000 reported in 2021. That’s an increase of 84 percent.
Fraud is mostly carried out through check washing, which occurs when criminals steal checks, chemically erase the information, and rewrite the checks payable to themselves while sometimes increasing the amount. Not only does this compromise your customers’ finances, but it prevents you from receiving the money you’re owed while destroying your relationship with the customer.
2. Increased adminstrative burden
Accepting paper checks means members of your team need to open envelopes, deposit funds, and update your customers’ files. It doesn’t sound like much, but over time, these mundane accounting tasks prevent your employees from completing creative and strategic projects. Manual labor also heightens the chance for errors, which causes confusion and erodes your relationship with customers.
Accepting digital payments enables you to automate your accounts receivable process, which reduces human error and frees up your employees while making your entire company run more efficiently.
3. Excessive costs
Saving money is paramount when owning a business as it enables you to grow, stay competitive, and sustain profitability. By accepting checks, however, you’re doing the opposite – Bank of America estimates the cost of processing a B2B check ranges from $4 to $20.
The AFP reports the median cost of initiating and receiving an ACH payment was between $0.26 and $0.50. These numbers clearly illustrate how much you can save through digital payments – and how much it costs your business to accept checks.
4. Stifled cash flow
When a customer pays by check, it often takes two to three days for that check to clear – not including mail time. Time to clear can also vary depending on each bank’s hold policy. Holidays and weekends play a role too. Other mishaps can occur, such as customers forgetting to sign the check, writing in the wrong dollar amount, or committing other typos. All of this hampers your ability to get paid and funnel those funds right back into your business.
Payments made through ACH or with debit and credit cards are faster and more secure, especially with set-it-and-forget-it features like AutoPay, which simply transfers funds from your customers’ accounts to your account automatically.
5. Difficult to scale
There’s no greater thrill for a business owner than watching their customer base grow. However, the last thing you want is to overwhelm your staff. Accepting checks does just that – the more clients who pay by check, the more manual labor is needed to deposit and reconcile the checks, and the more room you may need to store and file them.
Automating your AR process and accepting only digital payments eliminates these problems. AR automation grows along with your business and prevents you from putting undue stress on your team. Your customers’ information is saved on a single, secure cloud platform, so you won’t have to worry about cluttering your office with more filing cabinets or checks being lost or stuffed into the wrong customer’s file.
Tired of checks causing friction in your AR process? Automation is the future for the B2B market. And no one does AR automation like Bill360, the first automated payment platform for B2B companies. Offering seamless payment flow in a single platform for ACH and card processing, Bill360 syncs to existing software like QuickBooks and Xero in a matter of minutes, and training takes less than an hour.
Contact us to learn more about Bill360 and our no-risk, free 90-day trial.
